Bits Bucket For August 7, 2008
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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As state tax revenues continue to get weaker and weaker, anyone have any idea where governments can make up the difference?
The more they cut, the slower the economy going into a recession. Raising taxes seem out of the question because many of the high income earners are not paying much taxes due to the real estate bust and credit crisis and its tough to tax the poor.
1. Lower taxes, stimulate the economy. (95% sarcastic)
2. Federal Government Bailout
3. Sell Off shore drilling rights
4. Sell Roadway and Bridge rights to operating companies
5. Increase and add tolls
6. Build Casinos
7. Introduce new Lottery Schemes
8. As Hugo Chavez for oil, then sell it on the black market.
9. Sell conservation land to RE developers
Legalise drugs, and make their sale a state monopoly.
Thinking about this a bit more, California voters have already approved medical marijuana I believe. So it shouldn’t be too hard to introduce a network of state medical clinics which would also generate additional doctors’ fees and “police” the system. Later, when they needed more money, they could introduce medical heroin – a good cure for depression, and medical crack – a good cure for people living too long.
Medical use of marihuana is worlds away from the terrible drugs like crack and heroin.
Don’t blame the drug, blame the user.
Surgeons have been using morphine successfully for many years now.
Morphine addicts have been around for thousands of years.
Do what Schwartzenegger did. Promise “no new taxes because supply side works” and then backpedal and raise taxes proving that supply side doesn’t work.
Thank you Mr. Terminator.
How about:
1. Cut all the overhead and beaucracy.
2. Privatize many of functions that are non critical.
3. Reduce employee benifits and pensions to be more like private market.
4. Reduce overall government spending.
But those would be reasonable and have long term benefits.
Sounds like somebody has already legalized marijuana this morning…
[Just kidding]
Can’t do that. Makes too much sense.
Can we get baabaabooie on the ballot?
Now there’s a good question. The answer may lie in what great pools of capital are available for tapping. Pension funds? Insurance companies? Foreign countries that hold lots of dollars?
But what do the states offer that would lure capital out of these pools? Selling off publiclicly owned infrastructure, maybe?
Increase the percentage pension funds can invest in risky investments, natch!
Also–cut health benefits to retirees. This job ruined your health–now we’ll pull the rug out from under ya! Thanks for your years of faithful service!
(And yes, driving a bus for 20 years will ruin your health. Diesel fumes, high blood pressure, and second-hand smoke. That’s why I plan to get out in two years, with my health and my as yet un-vested pension money.)
in my country the allowed % of risky investments for pension funds was changed a few years ago by politics and labor unions, allowing more aggressive investment strategies (including ownership of hedgefunds). Of course that worked very well over the last five years (especially for pension fund manager bonuses), but this year more and more funds are crashing through their minimum balance requirements.
So I guess that after they have lost a lot of money in US RE crap and now the commodities sector, politics will force the funds to use more defensive strategies and loose even more money by selling all the risky stuff at the bottom. The remaining loss is mostly for the taxpayers
Over the last few years the minimum retirement age in my country has been changed from about 55 for many higher level gov. workers to 67 now and probably 70 within a few years. That saves a lot of pension fund euros and makes it possible to pay out the superfat pensions for our boomers. By the time generation X retires the funds will be out of cash for sure (or inflation will take care of the remaining buying power of the pensions).
WHO IS GOING TO LEND MONEY???
Aug. 7 (Bloomberg) — The Oakland, California, agency that runs toll bridges across the San Francisco Bay is proving that the era of cheap money for municipal borrowers is over.
This week the Bay Area Toll Authority sold more than $700 million of bonds at rates as high as 5.34 percent to refinance debt that cost 4 percent last year. That leaves less money to finance projects, such as bridge improvements.
“The cost of money just went way up,” said Brian Mayhew, the agency’s chief financial officer. “You may have projects on the cusp that are going to be difficult to do.”
Yeah where’s the money we can tap and where’s the fraud/waste we can cut. We should write that on every pol’s forehead.
One mid-90’s episode of PBS Nova documented the building of a new bridge across the Mississippi just above St. Louis. The engineer said, “Oh, building a bridge to hold a certain load is easy. Now, building that bridge to barely hold that load is the tough part.” That is, the engineer had to think about cutting costs almost as much about the actual bridge.
[I am convinced that the only reason some of our infrastructure is still standing is because there were no computers at the time the old stuff was built. Without calculators, builders erred far far on the side of caution, so a building with a 40 year design life could actually last +/-55 years or so. These days, computers allow a 40 year building to fall apart in 40 years and 1 week.]
I use this example as an archetypice of what’s been going on in the country for the past 50 years or so. Companies have been making their profit by shaving off the safety margin, be it bridges, offshoring business models, waste storage, soil management, water, financial systems, energy policy, you name it. We’ve been able to kick the can during years 40-55 of the old bridges (if you will pardon the analogy), but eventually you reach the end of the road. We’re running out of safety margin on everything at once. There’s no more safety margin to shave, no more waste to trim, no more slush to tap.
Yeah, I’m gloomy this morning.
That is a major concern, I agree but my first thought was we paid taxes for a strong infrastructure but our gov cut back on the infracture and instead paid for pickle museums and obscure studies that put money in their buddies’ pockets. Or in Alaska obviously directly into their own.
I have a hard time believing there’s nothing to shave when the housing bill Bush just signed was supposed to be loaded w/record breaking amounts of entitlements. There were lots of media reports about how the pols save up their requests for the “must pass” bills such as this.
In fact it seems I’ve been hearing about bills getting packed w/record breaking pork for quite a while now. As a citizen I want to see this situation finally addressed.
One big bridge being built is across the Colorado near the Hoover Dam.
yes, I think this is a very general problem these days.
Last year I read an interesting story about a Dutch developer (you already know that the Dutch are good at saving money, to say the least …) who was making loads of money in the Kiwi Real Estate market by building expensive looking homes where the absolute minimum of building materials was used, using all kinds or ‘clever’ calculations and other tricks. I guess the Kiwi builders still use higher safety margins (or more sloppy construction?), and because of that he could easily undercut them.
In the Dutch housing market construction quality is still relatively good compared to countries like the US, but despite new home prices that are at least 6x higher than around 1990, construction quality is far, far worse. Instead of just a few minor quirks then, a new Dutch home now often has hundreds of problems, often including some very serious problems. Value for money must be at an alltime low, without a doubt …
One thing’s for certain, they are out of easy answers.
Housing was the last card in the deck for the hyper-consumer economy. Time to skinny it up and put it where it needs to be: lower one’s tax profile and exposure as much as possible - consume less.
Now comes a hurtin’.
I reckon that they’ll raise fines for parking violations, speeding, etc…..and one thing I’ve noticed in Virginia that I think other states will emulate is the cops are just “staking out” highway entrance ramps at rush hour and flagging people with expired inspection stickers, busted brake lights, etc….I mean, I never saw cops do this in Texas or Oregon when I lived there, but cops here in Virginia can easily meet their quota on fines without even having to drive around in their cop cars.
Hey, that leaves more time for donuts.
This summer has seen the errection of cameras atop very high posts along I480. Now this is Canadian border bound but we’re not that close. I feel like Big Brother is watching my every move and wonder if the mailed tickets will start flying when people hit 66 mph or more.
Hat tip to Londoners and other watcher cities. How do you get used to that?
http://www.washingtonpost.com/wp-dyn/content/article/2008/08/01/AR2008080103570.html
Cruiser-Top Cameras Make Police Work a Snap
“A camera had snapped the plate number on his company’s van, along with hundreds of others along Charles County’s roadways, and run it through the Motor Vehicle Administration database.
“Initially purchased to find stolen cars, a handful of so-called tag readers are in use across the Washington region to catch not just car thieves, but also drivers who neglected or failed their emissions inspections or let their insurance policies lapse. The District and Prince George’s County use them to enforce parking rules. “
remember the law in VA to ban low rise jeans?
There’s been a serious uptick in parking violations in the Windy City. And Daley has just floated a proposal that motorists get the boot after two unpaid violations instead of three.
Carrie Ann, Chicago has become something of a “watcher city” in the past couple of years, though most of the cameras are in poor or high-crime areas.
I like those cameras in high crime situations. But these gigantic metal poles the highway cameras are mounted on have got to be costing the state a huge amount of money and they’re installing them pretty densely relative to distance.
They’re either there for a very serious (high pay-off) purpose or represent an amazing amount of pork.
Auger-inn, anything in your many sources about this?
Hey, I’ll check around for that CA. BTW, when is the last time you read of a Federal Agent held at gun point by a foreign Army, INSIDE THE U.S.?
http://washingtontimes.com/news/2008/aug/06/soldiers-cross-into-us-hold-guns-to-agent/
The incident occurred in the same area where heavily armed Mexican soldiers riding in a Humvee shot at a Border Patrol agent in 2002. A .50-caliber bullet ripped through the agent’s rear window as he sped away.
Now why was one of our Border Patrol Agent speeding away? Away from where? Mexico maybe?
What law enforcement organization would not chase a speeding car in an area known for drug and people smuggling?
There is always more to the story.
Lately here in the Va Beach/Norfolk area the State Police have been going crazy with pulling people over in both the morning and afternoon rushes. Usually they were content sitting in their spots and only pulling over the extreme speeders/violations but over the past couple of weeks they’ve been going all out. Writing more tickets has always been a way to boost revenue and it looks like that’s what’s going on here.
cops here in Virginia can easily meet their quota on fines without even having to drive around in their cop cars Many local authorities have been trying to get their cops to patrol less & so use less fuel.
Last Friday Night here in queens, i saw at 10 traffic cops just pull up and starting writing tickets on 20 -30 cars at 9:45 pm on a Friday right….Free parking starts after 10 pm….
Sneaky, cold, but legal
I live at a “T” intersection in Queens. On there are no crosswalk lines painted but there are wheelchair curb cuts on the top side of the T, so parking blocking them is a $165 parking ticket… They give out several tickets every week.
Yeah i got two of them here across the street (both dismissed but a waste of time) so i filed a complaint with Internal affairs claiming the officer ticketed and towed my car in 5 minutes with no proof i had violated the law and she was just making her quota for the day.
Well she got reprimanded, and lo and behold no more tickets for anyone since, and they even came out and painted a crosswalk with a big STOP on the road….
Borrow the money, then let the next guy figure out how to pay it back.
Declare bankruptcy.
Do what every backpedalling supply side liar does; Promise “no new taxes because supply side *works*”, and then backpedal and raise taxes just like Barney Schwartzenegger is doing in California.
http://www.kcra.com/politics/17093099/detail.html
The more they cut, the slower the economy going into a recession. Raising taxes seem out of the question because many of the high income earners are not paying much taxes due to the real estate bust and credit crisis and its tough to tax the poor.
Do you really think that “high income earners” (let’s say for sake of argument, people making over 400K/year, which would put them in the top 1%) aren’t paying much in taxes because of the Real Estate bust? In high-tax states, like CA, MA, or NY, they’re paying a fortune!
I suspect that most of the FBs were strivers and wannabes and were not “high income earners” (nor will they ever be, because they don’t believe in working!)
I think most of the tax shortfalls are due to having already spent the property tax computed from bubbled valuations, and counting on receiving property tax from all those houses and condos that are now sitting empty.
And here’s a thing that makes me extremely angry! Just because the Federal Government decided to not collect income tax owed on forgiven mortgage debt, doesn’t mean the STATES can’t collect. CA State has no intention of collecting income tax on forgiven mortgage debt, even though they have not specifically passed any law exempting them. (I had a phone conversation with my state legislator about this very issue.)
California: Before you talk about raising *my* taxes, how about collecting the tax already owed you from deadbeat flippers, get-rich-quickers, and mortgage scamsters?
Taxes are not owed, they are forcibly taken.
…and then misappropriated to politically connected private interests instead of the public good.
Right on NoSingleOne. We have just had the FBI bust the whole county heads of govenrment in Cleveland for just this thing. Why else would be spend millions to get jobs that pay only $160K. The return on investment must be incredible.
“California: Before you talk about raising *my* taxes, how about collecting the tax already owed you from deadbeat flippers, get-rich-quickers, and mortgage scamsters?”
Right on! Rake those shysters in CA over the coals for a while before you go after people that were innocent by-standers.
Of course politicians in their infinite wisdom already spend the money that was projected to be collected on escalating property valuations. Every politicians knows, property values never go down…or at least no the taxes collected on them. Gonna get interesting. Florida is a cess pool of laziness, incompetence and corruption. Luckily we don’t have a state income tax. So our politicos have no choice but to stick it to the home debtors via a property tax increase. I am sure that will work wonders for the battered housing market.
I see similarities in this discussion (more taxes versus spending cuts), to the debate over energy policy (more drilling versus conservation). Except that its different people who are in favor of cutting back government and cutting back domestic energy use.
Drilling could be seen as a “tax” on our environment. In both situations we cant solve the problem (energy independence, balanced budget) by taxes or drilling; but they can be part of an overall solution using a mixture of increased revenues and cutbacks.
In one case we are asking governments to cut back spending; but how much are we as a individuals willing to cut back on energy use. Consuming pertroleum is paying huge taxes, its just that the taxes are going to our friends in saudi arabia, russia, and venezuala.
The basic problem with taxes of any kind; nobody believes that any level of government will use their money wisely and efficiently They believe that a big chunk of it will be used to reward cronies/political contributors, and for goofy “unfunded mandates”, feel-good projects, and make work projects.
The government’s problem:
The turnips have run out of blood.
NY has a really odd school tax rebate called the STAR program.
The system encourages disricts to max out their tax rates since Albany matches district funds for education. The state has been suggesting the STAR program is up for a rework and the more economically healthy districts will be getting a cut in their windfall.
I was on the local education forum and the emotion is already flying. People can turn down heat in school buildings! Eliminate district funded sports! Aye! aye! aye! Keep your heads down and keep smiling HBBers.
In the last two recessions, they just cut NYC state school aid while increasing it in the rest of the state.
I told my daughter that if she shifted from Catholic school to public, she may not be able to graduate from high school, because she may not be able to take required courses. Especially since we will now have to pay for teachers to retire at age 55 increase of 62, under a deal Spitzer signed just before resigning.
I we weren’t so robbed, there would be plenty of money for everything. NYC spending used to be low, in part because it was screwed by the rest of the state. After a lawsuit, NYC’s spending was increased to tolerable levels, but the pension deal is going to drain it off. As as part of the deal for the increase, to keep NYC lower than the rest of the state (which was already over-funded), spending there was increased to the moon.
The spreadsheet is attached to this article.
http://www.r8ny.com/blog/larry_littlefield/before_voting_on_the_school_budget_download_this.html
Well I haven’t been in NYC schools to compare but I’ve been stunned at the money the burb schools have and I attended a pretty decent NH district myself that I have as a baseline. Meanwhile the Syracuse city schools are in a real fiscal mess.
Perhaps that’s the real problem. Rich burbs w/deep pocketed constituents still receiving lots of Albany money while city schools try to make due w/some amazingly nasty building code violations and lack of books/supplies.
Yeah, my past and present districts would take a hit if the STAR reforms get passed. They should. As long as the city money isn’t really going into someone’s pocket, as is rumored re Syracuse city schools, I think we need to redistribute.
I just can’t get behind the idea that “smarter, more likely to be succesful” kids need to spend money to attend a horse jumping competitition or a trip to Cooperstown while city school kids have sewer smells wafting into their cafeteria for years before the problem is dealt with. (And they wonder why the drop out rates are high?)
You know, I got really very angry when I read the article about Morgan Chase making 1.2 million for selling a loan (785K) to the Erie, PA school district. Why be astonished then if the infrastructure is so shoddy?
Despicable:
http://sacramentofordemocracy.org/?q=node/view/15132
“As long as the city money isn’t really going into someone’s pocket, as is rumored re Syracuse city schools, I think we need to redistribute.”
As for NYC’s schools, we would be better off the state didn’t redistribute. The city’s share of school aid is always well below its residents’s share of state tax payments ie. money redistributed away from the poor.
And legislators from the suburbs ramp up NYC teacher pensions, diverting money out of the classroom, because that’s where the teachers live.
Remember in the spreadsheet if there is an *, the per-child spending has been adjusted downward for the higher cost of living Downstate. It’s still off the charts.
“The city’s share of school aid is always well below its residents’s share of state tax payments”
If we truly believed we need a well educated populace, low income wouldn’t prevent a baseline of education from being met. (IE, that sewer problem should never have gone on for years in the Syr school, a school should have relatively current books for every student)
In September 2003 the school board was told all they had to do was “sign some papers”
Sargesse–
That line sounds so innocent but has proven to be a real precursor to destruction.
Carrie Ann,
Be careful what you wish for. More recent biology text books might be filled with intelligent design garbage to pacify the Texas school districts. You could be getting better material from an older book….
RE: anyone have any idea where governments can make up the difference?
Mazzland is using their $268mil tobacco settlement monies to pay for 20 years of unfunded public employee pension obligations.
It’s really just a drop in the bucket as the estimated tab is around $14.5 billion.
The $7 billion deficit for the health care benefits for the same public employee crowd remains unfunded.
hehehe…read between the lines and you can see people’s property taxes will blow thru the roof in the coming years!
Yeah, I’ll take a couple 6,000sf McMansions, please!
Correctamundo…..the politicians will go after the biggest targets, who are least likely to “vote with their feet”.
-Homeowners
-Business with non-portable infrastructure
-”Sin taxes” on booze, smoking, traffic violations.
Which brings up the question…….if the fine of a speeding ticket for (say) ten over the limit hits $500 (in today’s dollars), does that not cross the threshold for “cruel and unusual punishment”?
At a general level there is likely to be a feedback loop. Revenue slips, taxes get raised to bridge the gap, tax payers object, and only then once tax payers loudly insist are services really cut back in order to trim spending. That seems to some like politicians anxious to spend, but real cuts are almost impossible unless there is a strong demand for them by the public.
The US has, as a percentage of the whole population, the biggest prison population in the world by far. Much of the cost burden for all those prisoners, which is something on the order of $30k per prisoner per year and increasing, goes to the states. Long periods of incarceration are extremely expensive, but are not associated with increased safety, superior rehabilitation, or reduced recidivism.
actually that $30k is extremely cheap compared with Europe. In Netherlands we have loads of criminals who cost upwards from 1 million euro a year (because they get all kinds of psychological couseling etc. etc.; of course most of our prison cells look more like a Hilton hotel room than a real prison).
On the other side, a serious drug addict can cause 1 million or so in damages per year, so maybe it is cheaper to lock them up if you just weigh the costs. Of course if would be even more profitable to lock up all the banksters and politicians
“Long periods of incarceration are extremely expensive, but are not associated with increased safety, superior rehabilitation, or reduced recidivism.”
I’m gonna have to disagree on safety. That’s like saying fewer lions on the streets are not associated with fewer maulings. Rehabilitation and recidivism are tough, because trying to convince an amoral person with a superiority complex (that would be most crooks) that the general public aren’t his prey is very, very hard. It’s like convincing a lion not to feed on impalas or wildebeests.
cut out travel for employees, no flowers on the table, no trips to far off places, the top 10% can stop wasting money, reduce their salaries to minimum wage in order to motivate them, stop cutting shared resources and start cutting raises. -
they never cut what they should only shared resources like roads, parks, bridges, education, etc.
These should be exempt from cuts, they can not cut those anymore. Tax the rich their fair percentage.
Stop giving contracts to companies who have offshored and pay little or no taxes.
Stop giving deals to companies that pay little or no taxes like enron types who never paid taxes and lived off the government. Stop corporate welfare.
Amen!
Remember the California budget crisis of 2001-ish (the one that cost governor Gray Davis his job and brought in the Guvernator)? This next one is going to make that one look like my 8th-grade allowance crisis.
Coldwell Banker “Housetrology” Quiz Uncovers Intangible Home Buying Influences
http://www.foxbusiness.com/story/markets/industries/retail/coldwell-banker-housetrology-qui-uncovers-intangible-home-buying-influences/
Housetrology” online quiz in which the company asked people, “What’s Your House Sign?”
The Coldwell Banker “Housetrology” quiz is now also available on the ColdwellBanker.com Web site, giving everyone who participates a fun and unique way to uncover their inner “house signs” and better understand the various factors influencing their home style preferences.
Housetrology by Coldwell Banker®
What’s your house sign?
http://www.coldwellbanker.com/home/learn/housetrology/housetrology_landing.jsp
Have fun!
ROLFLMAO!
“Ranchero”?!?!?!?
Heck, at least two thirds of the questions didn’t even have an answer close to what would suit me. Good for a belly laugh though.
“You are the atypical nuclear family - having a minivan, a golden retriever and 2.5 children has never been your thing. You are living the city life and couldn’t see it any other way.”
Bwa ha ha ha ha aha
Maybe they need to fine tune their survey seeing as I have a minivan, a lab, and 2 children & have not lived near a city for over 10 years. Seems we’re not all stereotypes. I do miss those city lights though.
Gave me the same result and I am a suburbanite who wouldnt live directly in the city as I prefer having a yard for my golden… though you couldn’t get me to drive a minivan…
I know. I think I’m from another planet. I’ve never tried to match a vehicle w/my personality. It’s all functinality since the 240Z. But there could be a nice rough and rugged Jeep in my not too distance future.
Four wheeling on the beach sands…..whooooohooooo
w/deflated tires and slow non-destructive speeds of course.
I’m an urbanist who wants 8000sq ft home?
Yeah, riiiiiiiiiiiiight.
Leigh
I think my choice of Jetsons’ home pretty much determined my outcome - although instead of a bird bath out the window my modernist monstrosity overlooks a monstrous pool.
It pegged me as an urbanist too… even though I answered that trees are the only thing I want to see out of my window.
How dumb.
I said I wanted to see nothing but trees outside my window and it says my house sign is “Urbanist” - a 8000+ square foot apartment on Park Ave. It will be a cold day in hell I ever live in anything larger than 3000 Sq feet (1500 is already more than I need!).
/target Coldwell Banker
/golfclap
Me = (supposedly) Contemporarian
Your highly stylized nature and flair for the exotic leaves you craving open, light-filled spaces, high ceilings and majestic views of nature. You bring the outside in through the use of natural materials. A delicate fusion of interior design and simply streamlined modern detail comprises your dream home. Living that leaves a lasting impression is your goal.
I have to disagree with high ceilings. Actually, I consider myself a quaint, cape cod type so I’m not sure how I ended up with this sign.
Here’s one answer:
Since last week’s announcement that the Massachusetts Educational Financing Authority (MEFA) could not offer student loans as it could not obtain financing (no one wanted its bonds); Gov. Patrick has made the rounds and is encouraging the state pension fund to invest in MEFA Bonds.
http://www.boston.com/business/personalfinance/articles/2008/08/07/a_late_try_to_salvage_student_loans/
“We have 40,000 students and families who need help, and we’re right up against it,” Patrick said in an interview with the Globe last night. “This is a sound investment for the pension board and the endowments.”
No, Gov. Patrick, if it were a sound investment don’t you think everyone would be lining up to buy these bonds? Or is there something we don’t know? Will this virtually guarantee that student loan debt issued by MEFA will be “bailed out” by the state ten years in the future in order to ensure the solvency of this portion of the state pension fund investments at the expense of the responsible taxpayer?
Given the past two years in Massachusetts, I think the answer is a resounding “yes”.
The states can’t bail out anything if it is in deficit….they can only raise funds through asset sales or higher taxation or borrowing money.
Right now if CA fired all of its workers, it would still be running a deficit and with a even more negative outlook for future revenues.
Wonderful, now the pols are giving direct investment advice. If that ain’t a big old flashing danger sign - what is?
Maybe the College Tuition Bubble will burst! That would be a good thing.
Because of E-Z financing (and people using their home equity ATM to help pay, too), college costs have risen much faster than inflation. The financiers convinced the public that paying for college for 10 or 20 years after your graduated is perfectly normal.
I was able to pay my tuition in a private college by working part time as I was going to school full time. (OK, I had a scholarship that covered some of it.) This was back in 1980. Tuition was $2600/semester. I saved money by commuting to school and living with my parents. When I graduated, with no debt, I found a job (at Grumman Aerospace!) and was able to move out to my own place because I had no debt.
At a private college, this would be unthinkable today, except for the few that charge no tuition (Cooper Union…)
I’m on ARA’s email list for commercial properties. Over the last two months a lot of properties have come across that are college housing properties. Large condo complexes near big schools. Last night’s email was from a complex in Orono, Maine (UMaine). These guys have got to be worried.
Student loans are out of control! I know of a young girl who has obtained at least $10,000 in student loans to attend, get this, JUNIOR COLLEGE! I kid you not. Her parents co-signed so she could get more $$ then she would have qualified on her own. She said she needed that much money so that she could buy a lap top computer and subsidize her rent as she “needed” to work less hours so that she could get good grades. Granted this is anecdotal, and I don’t know that this is standard practice, however with the crazy lending that has taken place in housing, I have a suspicion it is. Can you imagine the defaults we are going to see from this? Problem is, these kids don’t have to start paying anythign back until they are out of school, so it’ll be awhile before we see the massive defaults a scenario like this is likely to create. What a nightmare. Such a sense of entitlement, and “I want it now” culture. It surely can’t end pretty.
as she “needed” to work less hours so that she could get good grades.
I work full time and am taking 9 hours right now in the summer (6 of which are grad school). I have straight A’s. I’ve been taking nomally 9 hours at a time during a regular semester. I’ve had one B since I’ve been back in school.
It’s not as hard as the kids like to make out. Good luck with those loans tho.
“No, Gov. Patrick, if it were a sound investment don’t you think everyone would be lining up to buy these bonds?”
That’s what worries me about the non-recourse situations. Why would investors return once they believe the average loan holder has no problem w/walking away.
I agree with this about non-recourse loans in general, but student loans are not non-recourse. I don’t know ll the details, but from what I understand recent changes in the bankruptcy laws ensured that students can basically sign the rest of their working lives away. All hail the return of indentured servitude.
We had the same situation in housing until the latest “housing crises”; now we have the powers that be encouraging and brokering write downs.
No doubt about it if enough students get in trouble by realizing after the fact getting in debt to the tune of $80,000 for a job that pays $35,000 a year is a bad idea; you’re going to start seeing enough people walk away - regardless of the consequences. And then the consequences will change - just like with all the “negotiated” settlements with mortgage defaults.
If I had a kid entering college right now I’d encourage them to load up on student loan debt. Heck, I’d have them pull far more than they need in anticipation of either an inflationary economy or massive “Student loan bailouts” in ten years if we have deflation. Either way, the debtor wins.
RE: Gov. Patrick,
This smirking clown is indebting Mazzlanders into tax oblivion.
He’s very conveniently sidestepped his promise for property tax relief and to lower the sales tax back to 5%, while puttin’ all taxpayers on the hook for massive and gross mismanagement of the state’s infrastructure, public transport, the Big Dig, and state pension obligations.
The best thing that could happen here in New England to send a message to the politico’s is that the Mazz voters get rid of the income tax.
Great, tuition due 8/1 and he’s just now figuring out there’s a problem. Need I say more?
I believe the gubmint, local & federal, will start raising taxes. With a lot of people already hurting, this will make a growing problem worse.
It’s a whirlpool, do your best to stay out of it!
I think the REALLY bad news comes out after the election. I’ve been loading up on shorts recently (Capitol One & Citibank) to name a few. Also a small position long gold. Still about 90% cash.
Just waiting and watching…………
Mike
“Just waiting and watching …”
Me too. I’m looking for people to empty out their mutual funds next year or the year after as their qwest for cash intensifies. That’ll be the time to go heavily into stocks.
Yep, the need for cash is intensifying.
Check out this article in Time. Didn’t we predict this “new simplicity”?
I agree that the really bad news will be post-election and beyond. For all those who still believe housing will recover next year, check out this latest from Karl Denninger at ‘The Market Ticker’ entitled ‘And So It Begins - The NEXT Implosion’
http://market-ticker.denninger.net/
I believe the gubmint, local & federal, will start raising taxes. With a lot of people already hurting, this will make a growing problem worse.
Isn’t this what happened in the Great Depression? And wasn’t the end result a bunch of organized tax revolts by the citizens?
“I think the REALLY bad news comes out after the election.”
Hate to say it, but I think that the Administration’s goal is to sacrifice the future as much as is needed (after all you can’t kill something more than once) to push the pain until then.
Not only expect lots of stuff to come out, but also the Fed to jack up interest rates bringing about a steep downturn then, to stop inflation. And in New York, the state legislature is covering up all our fiscal problems to then, while passing more pension deals.
“Hate to say it, but I think that the Administration’s goal is to sacrifice the future as much as is needed (after all you can’t kill something more than once) to push the pain until then.”
BULLSEYE.
The sole purpose of the stimulus scam was to boost GDP enough to stay out of recession long enough to get out of office.
What a bunch of fraudsters and pirates.
And to replenish the depleted bank’s balance sheets. Ultimately this is where this money will end up.
In case you haven’t heard, Obama is pushing for another stimulus. $1,000 per worker (or family, not sure which), paid by increased taxes on the oil companies.
Of course, the biggest holders of Oil company stocks are pension funds, so Barack Hussein is really taxing retirees to give money to J6P
Good for him. At least his motivation is honest.
And don’t forget that evil big oil’s profit margin is around 8% and the Govt makes around 23% of revenue so who’s really profiting in a “huge” way?
Do you really believe that the oil companies are going to return their (enormous) profits to their shareholders? No-*ucking-way.
Not sure why the tax whiners keep forgetting that oil profits are undertaxed in the US relative to virtually every other country, that US oil exploration is subsidized by tax breaks in contrast to other industries, and that oil companies have an energy monopoly because of 20 years of Republican energy policy that undercapitalized research into alternative energy sources.
What a reveral that would be.
the biggest holders of Oil company stocks are pension funds, so Barack Hussein is really taxing retirees to give money to J6P
Do I really care about a bunch of whining pensioners? I’m not a “public servant” and I don’t have a pension to fall back on in retirement… I work in private industry. I have a 401k and an IRA and my retirement is based on what I can save and invest during my productive years.
Stop trying to convince us that the wealthy (investor class) and the pensioners are being too heavily taxed in this country. Your not… try 15% cap gains while my labor is taxed much more heavily.
Stop whining about a “windfall tax” on big oil. If they actually put their profits back into exploration as opposed to stock buybacks I might have more sympathy…
Oh, and adding Barrack’s middle name to your posts against his policies as if your trying to associate him with the former Iraqi dictator or middle-eastern terrorists is in poor taste and very transparent.
Close italics, just in case I forgot…
Northeasterner,
The tax whiners will always attemt to demonize a typical capitalist system as “socialist” as a means to keep their dream of a fascist system alive where government (us) is subservient to corporate interests.
The corporate is a creation of central government. Who’s really to blame?
It’s kind of tough to blame govt when govt is rife with corporatist thugs, payoffs and graft.
But I can always count on some fool dumb enough to act on the corporatists behalf…. at his own economic peril of course.
It’s kind of tough to blame govt when govt is rife with corporatist thugs, payoffs and graft.
Yeah, that makes it real tough…
It’s all one in the same dude.
Hate to say it, but I think that the Administration’s goal is to sacrifice the future as much as is needed …
That’s been the plan for eight years now in every possible realm of policy, from food and drug safety to monetary policy to budget deficits to civil rights to foreign policy — you name it, the current administration has made poorly considered ideology-based short-view decisions that will impact us all for years to come.
The level of their incompetence and malfeasance is staggering.
Here is the thing about “stopping inflation” via high interest rates… at the end of the day our nation is broke from top to bottom and it will not matter if you raise or lower interest rates everyone will be poor:
1) The dollar crashes and everyone loses their life savings
2) The banks and all matter of debt/investments crash and everyone loses their life savings
Inflation or Deflation we will end up with social chaos, food riots, tax protests, and probably a major war. The ultimate result of “hyper-deflation” or “hyper-inflation” is the breakdown of trust in society.
So, as far as I can tell, the investment strategy for inflation and deflation is the same… own assets that are not simultaneously someone else’s liability. This rules out paper money, stocks, bonds, and leaves physical possession of commodities (and the means to defend them from starving mobs).
Also, cancel that life-insurance policy because it will never payout nor survive what is coming.
VT DAN DO YOU GET WIFI IN THAT BUNKER OF YOURS?
Yes
I think he was being ironic, VTD….
I remember hearing the same stuff circa 1978. When the s— hits the fan all that will happen is that we will stop trying to be an empire and go back to being a republic.
In 1978 we still had an industrial base and were not yet a major debtor nation. Families had savings and were not maxed out with credit card debt. Local governments were not on the verge of bankruptcy and wages were keeping up with inflation.
Very big difference.
VTDan, I’m still waiting for an explanation of how the Republican plan of lowering taxes on the rich while lowering the minimum wage is going to make this country wealthy again?
NoSingleOne, where did you get the idea that I somehow “justify” anything Republican or Democratic.
I encourage you to tell me how raising taxes on the rich and increasing the minimum wage will make us wealthy. Clearly both plans do nothing but redistribute wealth; however, at least lowering taxes is more moral than continuing to tax and lowering the minimum wage is more moral than using force against the free negotiations of wages.
Consider me an anarchist/capitalist who considers coercion immoral and unjustified.
“I encourage you to tell me how raising taxes on the rich and increasing the minimum wage will make us wealthy.”
That’s easy: raising taxes on the rich will plug holes in the deficit produced by undertaxing them since the Reagan years in order to subsidize “trickle down”, offshoring, and corporate welfare. Raising minimum wages will obviously raise living standards for the working poor and help decrease the need for food stamps, medicaid and social welfare programs (ie gov’t expenditures). It will probably even decrease the crime rate as well, further decreasing gov’t spending.
I have a hard time believing you when you use “morality” as a justification for your beliefs, especially since you apparently consider coercion as moral and justified, as long as it is practiced by corporations and people with money.
If a corporation is forcing you at gun point then I am against that. Raising minimum wage does not create more “wealth” and neither does “taxing the rich”, it merely redistributes wealth. I am against all government spending and taxes so that will do MUCH MORE than increasing minimum wage.
You sir would be a tyrant if given the opportunity.
You never answered my question about “making us *all* wealthy”. Only the free market where each voluntary exchange improves the welfare of both parties can we maximize the overall well being / wealth.
Last time I checked no one has a “right” to a job working for anyone else. In a free market if I were to hire you a $3/hr and you were willing to accept (because you were unemployed and had no better options) then we would both be happy… enter Mr. Government and he says sorry… you must go hungry and I must go without my lawn being mowed because I do not have enough money to pay you $7/hr.
I was just reading that Freddie lost big bucks on its mortgage portfolio that wasn’t conforming but also wasn’t subprime. While the WSJ didn’t say so, that sounds to me like Alt-A — liar loans and Option Arms.
Does this mean that the federal government, using my future taxes (which will no longer be available for my health care and Social Security in old age), is de facto guaranteeing bonds backed by liar loans and Option-Arms? Isn’t this what just happened? How were Fannie and Freddie allowed to put such loans in their federally guaranteed securities?
After it was asserted that my 40% down, 15-year, fixed rate mortgage back in the day did NOT have a federal guarantee?
Per Bloomberg, bond default rates will soar:]
http://www.bloomberg.com/apps/news?pid=20601087&sid=aGrt5PA8WDus&refer=home
The federal government should have wiped out the shareholders and made Fannie and Freddie bondholders take enough of a hit to make sure that their successor organizations could never deal in these kind of mortgages again. It still could, and should.
Well here is the answer, from the Village Voice: Fannie and Freddie were allowed/pushed into these sort of mortgages by HUD, under pressure from private banking interests and themselves, backed by lobbying dollars.
http://www.villagevoice.com/content/printVersion/541234
Unbelievable.
Good article. Kind of reminds you of Michael Brown and FEMA. We really need a meritocracy and not a culture of political cronyism if we ever hope to rise above this kind of incompetence.
Sadly, nepotism and cronyism is not unique to Democrats or Republicans, Federal or State politics, or the private sector. I don’t even know what we can do about it.
I don’t even know what we can do about it.
I know what can be done, it involves rope, pitchforks, and a few torches.
In case you missed this post yesterday, here is a primer on the fraud conducted over at HUD as reported by a former top insider. You might want to peruse the earlier links provided in the first paragraph as well. It takes awhile to get through it all but you will come away with a newfound respect for the level of fraud and graft inherent in our gov’t. I wouldn’t be so quick to dismiss the “bunker & guns” forecast when this all unwinds.
http://www.solari.com/blog/?p=1357&ref=patrick.net
I’ll have to read the Village Voice article on Freddie, but here’s some information on what was happening at Fannie. The following article contains a link to the report that resulted from an internal investigation of allegations of accounting fraud at Fannie Mae. It is a long report – over 2,000 pages. Bowyer: Feds nearly murdered Fannie http://www.cnbc.com/id/25918018
From the article:
“A whistle-blower in the company circulated an e-mail claiming that Fannie bought mortgages which were not financially sound, in order to bolster its minority-lending portfolio and resultantly, its political capital.
The report concluded that, indeed, Fannie had paid prices more consistent with prime mortgage values for loans that were closer to subprime in their credit characteristics. To add insult to injury, Fannie “capitalized” rather than expensed these premiums, and so doing exaggerated its earnings and the salaries of managers who received performance bonuses.”
Coverage of the Minority Lending Initiative described above begins on page 365 of the report.
Minority/low income lending represented less than 10% of FNM and FRE’s portfolio, compared to private lenders. I hope you’re not implying that Fannie and Freddie’s only mistake was participation in minority lending programs. Those arguments are like blaming subsidized home heating programs on the current price of oil.
There is more than enough proof that credit was too easily accessible to virtually every demographic group, and that Fannie and Freddie were considered “conservative”, having been less overleveraged than Bear Stearns, Merrill, etc. when it came to capitalization of toxic waste.
RE: liar loans and Option Arms.
Don’t forget the bogus appraisals that go arm in arm with garbage origination.
BK FB’ers come and go.
But that POS worn out asbestos infested house in some dirtbag neighborhood is the underlying collateral for all the paper that’s being foisted on the taxpayer!
And hey-just think the taxpayer could also be the hook for millions in EPA assessed costs for toxic clean-up’s because Jose was dumpin’ all his waste motor oil from his outlaw garage out in the backyard contaminating the ground water for scores of well owners.
Catherine Austin Fitts, former Asst. Secy of HUD, former partner in Dillon Read, has been pointing out in her blog that many of the fraudulent mortgages are sold multiple times, in different pools.
“After I began researching HUD fraud in the last 1990s, I would be contacted by people with experience with HUD fraud. They insisted the same home was being used to create ten or more mortgages that were placed into different pools. They alleged that Chase as the lead HUD servicer and the other big banks were implementing such systems. This was why we would see the same house default two, three or four times in a year, they claimed. You needed to churn the FHA mortgages through multiple defaults to generate the cash to keep all these fraudulent pools afloat. This, they insisted, was all going to finance various secret government operations and private agendas.
“This issue of collateral fraud was repeated in other markets. As I started to learn more about precious metals and the commodities markets I would hear story after story about precious metals arrangements in which investors really had a bank credit — there was no real bullion behind the arrangement.
“I have come to believe that the allegations of mortgage collateral fraud are true - not just for FHA and Ginnie Mae at HUD, but across the board throughout the mortgage markets.”
I thought WalMart had closed all the Hypermarts 15 years ago. This morning I am reading about a mall that is in forbearance as as result of the Hypermart shutting down a year ago.
“Benjamin Plaza Shopping Center, 8944 Hillcrest Road, Kansas City, MO
The property was acquired via a deed-in-lieu of foreclosure in November 2005. The adjacent Hypermart, a Wal-Mart facility, closed in January 2007. Existing tenants have expressed concern about the impact of the Hypermart closing. Savers closed its store on January 2007, prior to its lease expiration. Unsolicited verbal and written purchase offers have been received. Occupancy was 31% as of May 31. “
It’s in forebearance mainly because some idiot developer thought it would be a good idea to build a mall within spitting distance of “Gangland Estates”……it was sinking like the Titanic even before the real estate crash
Wiki: “Bannister Mall”
And, I might add, the local government, who also promoted the effort, believing that Johnson County, Kansas (and the other outlying suburban) residents were chomping at the bit to get the diverse, urban shopping mall experience.
It’s about a year since the credit crunch really started. I didn’t get out at the top (October) or even the local top (my index funds were based on Russel 2000 I think, and that started down in July) but I got out in mid August, and it has saved me big bucks over this past year.
Thanks to all the posters here who helped me understand the implications of the credit collapse. I never would have sold without the discussions here. Again, thank you.
Cash is king, yes?
Of course, cash being king must be inflationary. Let’s all rush into gold.
Oh wait! That doesn’t sound right.
Gold has to be at the top of the list of things people don’t need, and won’t be spending their hard earned money on. Me thinks both gold and oil cost about 3 times as much as they should.
Before this is all over, gold at $300/oz and oil at $40/bl sounds reasonable.
That is roughly a 2/3 decrease for both those commodities. Do you expect a similar drop in other prices?
I expect a return to near 2000-2002 prices in just about everything.. We can pretty much toss any gains from the easy-money-days of the early 21st Century out the window.
Oil is about 15 cents a cup right now, very cheap. Gold should be about the average persons monthly wage per ounce. So about $4000.00 per ounce. Oil about 500.00 a barrel.
This correction is just about over
I expect a return to near 2000-2002 prices in just about everything.
That would be nice. I have cash now but have been contemplating the gold thing as protection against the mismanagement of the currency.
My concern is the risk for hyperinflation. There is considerable fundamental reason why that could happen. On the other hand, I can’t figure out how deflation is likely. Can you elaborate on that?
Thats 1.8cent per oz for oil.
$28 per gram for gold
Dude you can always make thing sound cheaper by breaking it down to smaller units. Dont be an idiot.
not much else to say.. oil was about $23 or so in 2002.. and I’ll make some allowance for oil to be near twice that, due to the war and heightened tensions in the MidEast.
Gold was around $250-$300 in 2002.
On the macroeconomic front what, aside from the RE / credit bubble, happened during the last 5 or 6 years? Not much of anything.. it was a fairly uneventful period.
So, as the bubble deflates, everything that inflated along with it deflates.
The only reason we are at risk for hyperinflation is that Congress and the Fed are printing bailout money like mad. We need a balanced budget amendment to reign in the mf-ers.
Gold is not an investment. Repeat after me: gold is not an investment. And I’m saying this as someone who has a significant amount of my available wealth stored as gold.
To me, the inflation/deflation debate is not just useless, it is counterproductive. If the value of the dollar increases due to deflation (meaning the Fed’s destruction of dollars), gold will fall in value in dollars, but it should still buy as much as it did before. If the value of the dollar decreases due to inflation (meaning the Fed’s expansion of the money supply), gold will rise in value in dollars, but it should still buy as much as it did before. Gold, to me, is the ultimate store of wealth, not an investment.
If the dollar becomes more valuable, more dollars from overseas will flow into the country, buying raw materials or goods that are cheaper because of a strong dollar. An influx of dollars will mean an expansion of the national money supply, which means the dollar gets weaker nationally. If the dollar gets too weak, dollars will flood into the market as well, which means again more dollars = prices go up.
Gold secures one’s wealth, but it does not make a good investment. The only way to truly understand gold as a store of wealth is to compare gold to ALL your output prices (energy, food, housing, etc). For me, gold is relatively fixed in terms of the dollar-cost of anything else in my life. I see fluctuations around a range of 10% here and there, but as prices go up, my gold holds its value. As prices go down, my gold holds its value.
There’s not much to promote for gold if you can’t save at all. If you’re spending too much, you’ll get hurt regardless of inflation or deflation. Get out of debt, save some in gold, save some in cash, and put the rest into GOOD investments that pay a realistic dividend each and every year. If the P/E is over 5, I won’t buy it. If it doesn’t issue dividends, I won’t buy it.
If we get a “controlled deflation” which is the best-case scenario then prices could return to the level they were at before we started issuing more federal reserve notes than we had gold/silver backing. This means that prices could return to pre-1965 levels (Yes I know that we went off of gold standard in 1913/1933). At the same time the destruction of the money supply will make even pre-1965 prices out of reach for the vast majority of the population which will be unemployed in such a deflationary event.
Riddle me this all of you who favor the deflation theory… if we get deflation and prices/incomes fall to 2000 levels then we would expect that total federal tax revenue would fall back to 2T (from 2.5T in 2007). Interest on the national debt would then be 25% of revenue and growing without even counting the social security “trust fund debt”. Our deficit would then be 25% or 50% of revenue (500B to 1T) on a cash basis. Running those kinds of deficits will cause our “interest payments” to exceed our revenue within 10 years (even if they cut a lot of social security and medicare benefits and don’t spend trillions to bailout F&F and FDIC).
By predicting deflation you are predicting that the US will simply default on its debt instead of print money to pay its debt.
At some point the government will be borrowing money to pay the interest on borrowed money. This will force hyperinflation. Hyperinflation will probably occur as soon as it becomes inevitable that this is the only route for the US government and foreigners start dumping their dollars. In other words, it could start at any time.
A.B. Dada:
I value your wise words on this blog, but ‘get out of debt’?
Seems to me that with the current course of the central banks (ECB is now firmly on the same inflationist track as the FED and BOJ: ignore inflation and keep cranking up the money supply), debtors are the big winners (like they were for the last 10-20 years) and savers loose buying power every year (because of inflation, taxes etc.).
In most of Europe gold has not kept up with real estate over the last 10-20 years, certainly not if you consider that most RE owners are using huge leverage (like 1:10) and will probably never have to pay back their mortgage debt (the bailouts in the US will be nothing compared to what is coming in Euroland if prices really start falling). Over the last months RE has been declining a bit in some Euro countries, but the decline is small compared to that of gold. With the euro threatening to break 1.53 to the dollar support today, I’m wondering what to do
Remember that the biggest class of creditors are individuals who put their money in banks. Banks are the biggest debtors lending out money that they have “naked shorted” 10 to 1 (best case).
VirginiaTechDan:
I think the situation is a bit different because it is not just the US that is trying to inflate away, Japan and Euroland will probably follow the same hyperinflationary route in the coming years. This means the dollar will NOT crash and the US will keep exporting debt and inflation to foreign countries. All the big economic blocks (except maybe Asia) are trying to print themselves out of the mess, because for the politicians it is the only option.
But until now I don’t see any proof of hyperinflation, except maybe in the money supply numbers.
The dollar may not fall against other currencies, but it can still fall against real wealth (commodities). What good does it do anyone if a barrel of oil is $1M and $1.5M euros? The effect is the same.
The fact that everyone will “hyper-inflate” together just means that there will be no stable outside currency that we can fall back on. It means that global productivity will crash and there will be NO ONE in the position of sending aid from out side like in past hyper-inflation.
To me, the inflation/deflation debate is not just useless, it is counterproductive. If the value of the dollar increases due to deflation (meaning the Fed’s destruction of dollars), gold will fall in value in dollars, but it should still buy as much as it did before. If the value of the dollar decreases due to inflation (meaning the Fed’s expansion of the money supply), gold will rise in value in dollars …
AB, I find this perspective useful.
While it doesn’t entirely assuage my fear that precious metals have been somewhat bubbly in the past year, it does make me more comfortable investing little-by-little in gold and silver — with an eye on the far horizon instead of short-term fluctuations in price.
Nice feeling, no? You gotta know when to take those profits and walk away.
Yeah. It is a nice feeling. It would have felt nicer if I had managed to convince my parents and brother to do the same, but the ‘rents listen to Bob Brinker and my brother just said that the P/E ratio of the S&P seemed good to him. I tried to point out that the P/E ratio was only good if earnings didn’t go down, but he wasn’t interested.
How did my tiny little comment become another huge gold discussion?
The WSJ is getting obsessed with imploding mortgages, for the 2nd day in a row … They are predicting that 65% of the ‘07 subprime loans will default.
Mortgages Made in 2007 Go Bad at Rapid Clip Delinquencies Worse Than 2006 Vintage
New Stress on Banks
Mortgages issued in the first part of 2007 are going bad at a pace that far outstrips the 2006 vintage, suggesting that the blow to the financial system from U.S. housing woes will be deeper than many people earlier estimated.
An analysis prepared for The Wall Street Journal by the Federal Deposit Insurance Corp. shows that 0.91% of prime mortgages from 2007 were seriously delinquent after 12 months, meaning they were in foreclosure or at least 90 days past due. The equivalent figure for 2006 prime mortgages was just 0.33% after 12 months. The data reflect delinquencies as of April 30.
Some 65% of subprime loans originated in 2007 will end up in default compared with about 45% of those originated in 2006, according to estimates by UBS AG, which looked at loans packaged into securities.
So what happens to Mexico now that El Norte no longer provides like it used to?
If you teach a man to fish, but you don’t teach him how to build a boat, when the boat breaks he doesn’t know where to turn–and it’s slim pickings from the dock.
Maybe they’ll change their laws enough to reverse the decline of their oil production.
They kept making the dumb loans right through 2007, long after just about everyone agreed on the bubble and bust.
http://online.wsj.com/article/SB121805947661818327.html?mod=RealEstateMain_1
“An analysis prepared for The Wall Street Journal by the Federal Deposit Insurance Corp. shows that 0.91% of prime mortgages from 2007 were seriously delinquent after 12 months, meaning they were in foreclosure or at least 90 days past due. The equivalent figure for 2006 prime mortgages was just 0.33% after 12 months. The data reflect delinquencies as of April 30.”
“Evidence that lax lending standards were leading to higher mortgage delinquencies first emerged in late 2006. The first major casualty of the subprime credit crisis, New Century Financial Corp., imploded in early 2007. Yet the data from the FDIC and others suggest that lenders didn’t substantially tighten standards until at least July or August 2007, when credit jitters hit Wall Street and financial stocks began to swoon.”
They kept generating crap as long as there was a toilet to stick it in.
3 Million Bees living in 1 home.
http://www.upi.com/Odd_News/2008/08/06/3_million_bees_found_in_Miami_home/UPI-74321218062627/http://www.upi.com/Odd_News/2008/08/06/3_million_bees_found_in_Miami_home/UPI-74321218062627/
No quote from the home owner, I wonder why?
So that’s where they all went!
9. Sell conservation land to RE developers
But the realtors in Florida said that the state was running out of land and the consumer should buy now during the boom. Gee, I wonder if they were telling the truth?
Sure, let’s sell conservation land. In 2005, Representitive Pombo (R-CA) wanted to sell Teddy Roosevelt Island to developers. Yep, there is a monument to Teddy Roosevelt in Washington, but it’s not on the main Mall. It’s a small island in the river, totally forested with NO development, only hiking trails. There’s a statue of TR surrounded by a little plaza engraved with TR’s quotes, but the lack of development IS the monument, in honor of Teddy’s conservation efforts.
Pombo saw that little patch of land as hundreds of millions for luxury condos. Sure, and while we’re at it, I think we should sell the observation room at the top of the Washington Monument to the Saudi’s for private parties. /snark
Pombo was voted out of office in 2006.
Banks Scramble For Bank Funds as Crisis Worsens
“… Financial markets showed little reaction. The FTSE-100 index of leading shares has already fallen 800 points since mid May and the pound has shed 6 cents against the dollar in the past month as the economic outlook worsens.
Fears are growing the economy could soon enter recession for the first time since the early 1990s when hundreds of thousands of people lost their jobs and homes.
House prices are sliding even faster than they were then. Data from Britain’s biggest mortgage lender on Thursday showed house prices down a record 10.9 percent on the year in July.
The property downturn is battering consumer confidence and taking its toll on the wider economy as homebuilders cut thousands of jobs and household goods sales dive….”
http://www.bnet.com/2407-13071_23-192468.html
Bye, bye Angleterre
hoz,
What do you mean by “Bye, bye Angleterre?”
An inquiring mind wants to know.
Bye, bye England
SIV fire sales in the spotlight
By Anousha Sakoui and Paul J Davies
“Fire sales of the complex debt products at the heart of the credit crisis have increasingly been conducted closer to the public eye in recent weeks and lent much needed visibility to the going rate for these difficult to digest, or ‘toxic’ assets.
Deloitte and Goldman Sachs are halfway through a series of auctions to establish the value of assets held by four failed structured investment vehicles (SIVs) as part of a restructuring plan for these off-balance sheet funds that were a main pillar of the so-called shadow banking system.
Meanwhile, banks such as Merrill Lynch have bitten the bullet and sold off some of their own holdings of such structured bonds. Also several large collateralised debt obligations that held bits of mortgage backed bonds and of other CDOs have been liquidated.
The extremely low prices seen so far in these sales will be carefully monitored by the banks and investors who still hold large pools of similar assets.
They will also be watched by all those financial institutions’ traditional equity investors….”
http://www.ft.com/cms/s/0/e2b91eb4-63d0-11dd-844f-0000779fd18c.html
Man, the guy on the street who has half a brain is some pizzed off!
The reader comments are way better than the storyline.
http://dealbook.blogs.nytimes.com/2008/08/06/wall-street-report-tries-to-dissect-financial-meltdown/
“Mr. Corrigan, a former president of the New York Federal Reserve, formed the group in April to develop a private-sector plan for minimizing future problems in the financial markets. He said in an interview that he hoped the report’s suggestions would be adopted industry-wide within two years.”
Interesting. It has been reported two weeks ago that Mr. Ackermann (DB) now supports such a self regulation of the finance industry, while before April he did not.
In April, there was Bilderberg, with Ackermann and this gentleman: “E. Gerald Corrigan, Managing Director, Goldman, Sachs & Co., New York, NY; former President,Federal Reserve Bank of New York” on the guest list. The Dutch Queen was there too.
Bad financial practice can’t exist without bad theory
By Anthony Rayman
“…There is no objection to the disclosure of fair values on company balance sheets (best practice under the historical system); but to incorporate them throughout the accounts produces a mishmash of actual transactions and hypothetical market values – sometimes unintelligible even to the company’s financial directors.
Since the reporting of changes in fair value as gains or losses in the profit and loss account can make a low investment return look better than a high one, fair value accounting is useless for comparisons of corporate performance. By promoting the fallacy that an increase in the value of an asset necessarily makes its owner better off, it has repercussions throughout the economy.
The housing market is an obvious casualty. The amount homeowners can afford to borrow depends on their ability to service the loan – normally out of income. The fair value fallacy encourages the mistaken belief that it is safe to borrow or lend, provided the loan is covered by the market value of the property. The result is a spiral of ever-increasing loans pushing up property values, which make possible ever-increasing loans. Pyramid schemes are normally against the law. Pyramid lending, however, has been made respectable by a fundamental error in accounting theory….”
http://www.ft.com/cms/s/0/b878bd40-63cf-11dd-844f-0000779fd18c.html
–
It is more a case of dishonest bankers and financiers and govt officials whom they control. Debt Pushers control the govts in all the Anglo countries.
Jas
Stagflation is in the Bag
The Fed’s Next Move is Down
http://www.321gold.com/editorials/browne/browne080708.html
“”Although few monetary hawks felt that there was any reasonable chance for an inflation-fighting rate hike this week, there was hope that lone FOMC dissenter Richard Fisher would be joined by other committee members in voting against the current round of liquidity injections. My feeling is that the next rate move will be down.
Facing the prospect of both inflation and recessionary forces, the Fed is boxed in.
As a student of the Great Depression, Fed Chairman Bernanke has correctly, in my view, sensed that whereas inflation does the greatest long-term economic damage, it is recession that his political masters most fear. He is also aware that it was the raising of interest rates that turned the 1930 recession into the Great Depression of 1933, which lasted until World War II.
With 5 million American homes vacant, the “Big 3″ auto giants heading towards bankruptcy and some $4 trillion already wiped off of American home values, things look bad for American consumer demand. With consumer spending accounting for 72 percent of GDP, this should ensure recession. To try to change this outcome, the Fed stands ready to implement the most inflationary monetary policy in its history.
Looking ahead, Nouriel Roubini, the former Clinton White House economist, forecasts credit losses will amount to some $2 trillion. So, while the Fed has applied Band-Aids to the financial crisis, the evidence is that internally, financial institutions are still bleeding fast.
The latest fall in commodity prices has given Fed Chairman Bernanke the wiggle room that he has hoped for desperately these past months. The pullback in oil and other commodities will give him the golden opportunity to lower interest rates further to avoid the looming recession from morphing into depression.
Investors should expect falling worldwide interest rates. Short-term government bonds in inherently strong currencies, like Swiss Francs, remain attractive. As hyper-stagflation and acute financial stress becomes manifest, gold will likely rise significantly.”"
More Stagflation is in the Bag
Path to the Printing Press
http://www.321gold.com/editorials/willie/willie080708.html
“”Americans think they are immune to the immutable laws of economic nature. They dispatched most of their industry to the Pacific Rim, then Mexico, finally a more complex mix of Asia with China the new center. With that exodus went legitimate income. In its place was the great majority of the US Economy resting atop a housing and mortgage bubble. The US economists, led by the former US Federal Reserve Chairman, endorsed the plan as not only sound, but advanced in risk offset price modeling. Now the entire model is in the process of dissolving, taking down the entire US banking system.
Current USFed Chairman Bernanke once said, “But the US government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. “The hidden cost is beyond description as huge, like ruin of a national financial foundation. It is a device that kills the host, hardly any solution. When the financial system is totally broken, when allies are totally betrayed, when investors are totally ransacked, the printing press remains to save the day. Usage of the printing press in large scale volume will earn the certain reward of astronomical gold and silver prices. The decisions to be made will determine whether a return to precious metal supremacy is accompanied either first by very high interest rates and uncontrollable credit derivative meltdowns, or second by suppressed controlled interest rates and total discouragement of savings from artificially low interest rates. Systemic meltdown awaits the first path, while continued pursuit of bubbles the second path. Either way, gold wins! The spoils will be devastation for the first path, but rationing for the second path. Both paths require the most dreaded device to be deployed at the last turn, the printing press. Other alternatives will have been exhausted.”"
“…that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”
Some American motorists may be wondering about this academic theory at this point.
None of this follows. There are serious problems with offshoring, yet the US continues to dominate value creation and addition. The idea that “Now the entire model is in the process of dissolving, taking down the entire US banking system.” isn’t supportable. Outside housing and finance there is still quite a lot going on. Enough for another super-mega-boom? Almost certainly not. Enough for growth in the 2-3% range after this recession? Very likely. This was a huge boom and the downside will suck terribly, but productivity and productivity growth are still the most important keys to everything. Housing and finance are big industries, but even together they only amount to between ten and twenty percent of the economy depending on how they are measured.
As far as this stuff about printing presses goes, that is even further out from the truth. The money supply grew along with the boom and is now receding. The hyperinflationary printing eluded to here can not be seen in the money supply numbers. Furthermore, the nature of this printing needs to be understood. The Fed gave up the power of the printing press to the banks who used their lending to conjure money. Now that the lending party has ended and those who joined in are heaving their guts up, the conjured money is blowing away along with the bogus loans that evoked it. By letting their gold bug reactions and view of the world dominate they are failing to see the deflation in the mix and the real source of the inflation we are seeing which is competition for limited energy and food production.
This chasm of difference in perceptions leads to huge differences in advice for climbing out of this. The finance and housing sector wants to clip this part of the cycle so that they can get back into the game. Crank up the interest rates, crush all other industries as much as possible, then the cycle starts again and they can start on the next bubble blow. Keeping interest rates low limits the damage to the rest of the economy while squeezing out the remains of the bubble by letting inflation work its magic. What this gold bug is recommending is based on his desire to make money with gold more than an enlightened strategy for recovering from this bubble in the most socially responsible way.
Mole Man, “Keeping interest rates low limits the damage to the rest of the economy while squeezing out the remains of the bubble by letting inflation work its magic.”
Great post!
The point is “by letting inflation work its magic” the US will see Stagflation like the 1970’s. This stagflation started with the dotcom bust in 2000! In stagflation the stock market remains in a trading range while the dollar loses value (inflation in prices).
At some future date the US Fed will be forced to raise the interest rates above the rate of inflation to support the dollar (early 1980’s). At this time it will be time to sell your metals/energy funds and buy back in to stocks and real estate.
See Dow/Gold ratio at Wikipedia.
Best Wishes!
Yours was quite the good post, Moleman. Thank you for taking the time.
It’s interesting that this particular thread featured a link to a “gold oriented” website. Hardly a good source for non-biased market information.
“As hyper-stagflation…”
What a moron.
Jas
Keep your powder dry
http://market-ticker.denninger.net/
“”We are facing a time in this nation economically that may rival the 1930s. But that is not a thing to fear. Busts follow booms; it is a natural part of life that when one pushes the pendulum too hard one way, it will return and clock you on the rebound. This isn’t to be feared, it is to be viewed as the opportunity that it is. If you’ve been prudent, remained out of debt and have capital to deploy, there are some incredible opportunities coming your way in the next few years.
Patience is the virtue that you need at times like this, as it was in the 2000-03 tech wreck; it is not until everyone on CNBC is saying to puke up all your stocks and never buy one again that you want to be back into that market long for investment purposes, and until nobody wants to touch real estate we will not bottom in that area either. Keep your powder dry and look for the opportunities; if you’re a trader, these are salad days, albeit with more than enough volatility to cut your head off should you get overextended. So play thoughtfully, not in fear.”"
Best Wishes!
“But that is not a thing to fear.”
I fear seeing the lives of friends and loved ones financially ruined.
Big Freeze part 4: A US recovery
August 6 2008 20:17
“…Today, the end of the current financial crisis looks further away than it did in August 2007. Policy is not yet ahead of the curve. I used to remark in the context of the emerging market crises of the 1990s that I would date the moment of recovery from the first time an official pronouncement proved to be too pessimistic. By this standard, recovery is not at hand.
The best prospects for managing a very difficult situation involve a comprehensive effort to support the real economy through temporary fiscal stimulus and the financial system through a programme of measures directed at capital rather than liquidity problems. These steps offer no assurance of success but reactive drift raises the risks of costly failure.”
The writer is Charles W. Eliot university professor at Harvard and a managing director of D.E. Shaw & Co
http://www.ft.com/cms/s/0/794801a8-63e8-11dd-844f-0000779fd18c,dwp_uuid=13e90304-4dc0-11dd-820e-000077b07658.html
A must read, probably not but well written yes.
How on the earth do these academics find time to carry out their university missions and also work on the side as managing directors for consulting firms? I wish I had this kind of energy.
Business Services Industry
Lawrence H. Summers to Join The D. E. Shaw Group
Business Wire, Oct 19, 2006
NEW YORK — The D. E. Shaw group announced today that Lawrence H. Summers, former Treasury Secretary and Harvard University president, will join the firm as a managing director. In this capacity, Dr. Summers will be involved on a part-time basis in various strategic initiatives and high-level portfolio management activities and, along with the firm’s other managing directors, in reviewing the overall operations of the D. E. Shaw group.
So long California
from the San Diego UT
“…Nearly 1,250 families have asked for food this year at New Seasons Church in Spring Valley, one of the 300 local agencies that distribute food donated by the San Diego Food Bank.
That’s up from 550 last year, said Angela Kretschmar, who runs the church’s food giveaway. She said she thinks the church will have to spend about $1,600 more this year to keep the pantry fully stocked.
J. Scofield Hage, the Food Bank’s executive director, acknowledges that the agency needs “to build our inventory faster,” but he also has ambitious plans. The charity, which distributed 9 million pounds of food last year, may try to nearly triple that output within three to five years.
Cindy Shaw, of Chula Vista’s Life Christian Center, doesn’t plan to wait for the Food Bank to grow. She said she has enough for the needy because of partnerships her church has formed with other suppliers.
“We’ve seen people in our Dumpsters,” she said. “We’re telling them, ‘No, come in, get the good stuff.’ ”
http://www.signonsandiego.com/news/metro/20080806-9999-1m6food.html
The increase in demand is stunning. Any where from 25% to 100% no community is spared.
Insight: Survival of the financial fittest
By Mohamed El-Erian
“…For most banks, the outcome is a slimmer operational model that commands lower expected returns on equity. Indeed, the question is not whether this will materialise over the next year. It will. The question is how quickly; and the answer is a function of housing prices. The debacle in housing is at the root of the dislocation that is forcing the banks’ balance sheet implosion, sapping investors’ risk appetite and helping to pull the rug from underneath other credit facilities (with the most recent example being car leases) – all of which drive the ongoing morphing of the credit crunch into widespread economic weakness….
Some smaller and medium-sized banks will be unable to find partners to recapitalise them and enhance their balance sheets. They will fail; the Federal Deposit Insurance Corporation will step in to protect eligible deposits and equity and bond holders will take another hit. Other banks will fare better. Due to their valuable core businesses, they will find partners to finance them directly or through mergers and acquisitions. Bond holders will do better while equity holders will continue to face downside….”
http://www.ft.com/cms/s/0/7239f16e-63c5-11dd-844f-0000779fd18c.html
Having posted the financial news from the FT, it is time to post from the American rags.
Owners Think Home Values Have Risen
By SUSHIL CHEEMA
“…In its second-quarter survey, released Wednesday, Zillow said that 62% of the 1,361 homeowners who responded said they believe the value of their home increased over the previous year.
But according to Zillow, that high level of optimism is out of sync with reality. Zillow’s data show that 77% of U.S. homes depreciated in value over the past year, while only 19% appreciated….”
http://online.wsj.com/article/SB121807993705319711.html
” … 62% of the 1,361 homeowners who responded said they believe the value of their home increased over the previous year.”
This is GREAT NEWS! This means these folks won’t walk away from their house and leave the bank stuck with it. It also means they will do whatever it takes to keep up with their house payments.
Keep the hope alive.
One cannot conclude the denial phase of the bust has ended until homeowners beliefs align more closely with housing market reality.
Random economic anecdote:
I recently received a gift certificate to Amazon for my birthday. I filled up my cart and checked out using the free super saver shipping, which Amazon claims adds 3-5 days on to the normal shipping times.
I believe that when you choose this option they simply keep your order in the back of the line, allowing paid shipping orders to jump ahead of it for 3-5 days.
The package arrived at my door in less than 48 hours.
Business has to be really slow for them to get to my order that fast.
Spend those gift certificates as fast as you can, and advise friends and family about the risk that the company will arbitrarily decide not to honor them.
Following Christmas, expect a fair number of retailers to declare bankruptcy as holiday sales will likely be the weakest in about 20 years. Because their gift certificates are considered unsecured loans to the company and the holder a low-priority creditor, gift certificates become worthless pieces of paper/plastic.
A fair amount of dollars spent on holiday gift cards is simply going to evaporate, adding insult to injury for those who stretched themselves financially to give them.
True. If you hold any Circuit City or Toys R Us cards, use them now.
Yeah, Amazon was throttling “free” orders to push its stupid annual fee product for two-day shipping.
That was all good and dandy in the bad old days. Now that they are hurting, they will ship “free” just as fast as the other stuff. Those chumps that fork out $80 a year must be looking pretty silly right about now.
They are also getting whacked from the new NY tax law change. Expect other states to follow.
I’m in the process of selling some old books. Last time I did it was late 2004. At that time, Amazon was a lot cheaper than Half.com/eBay in terms of commissions. I started to list books a week or two ago and then noticed that Amazon was charging 20% commission. That seemed too high so I went over to Half.com and they were charging just 12.5%, which still seemed high. I’ll have to find my old spreadsheet, but I seem to remember Amazon being more like 10%.
Point being, they seem to be trying to raise cash by looking for loose change under the sofa cushions. I know that they’ve invested a lot in developing a service to compete with iTunes that hasn’t yielded any glimmer of success. Their Kindle book reader looks to be a bust as well. Wonder how they’ll fare this holiday season…
Their Kindle book reader looks to be a bust as well.
Who could’ve predicted that?
/sarcasm
I actually love my kindle (currently reading this blog on kindle). My morning commute has become much more tolerable. The E ink display is easier on the eyes so you can actually read for hours…. and the wireless plan is free and unlimited.
satre,
Product can be great, but if only a few people are willing to spend the money to get it, it can still be a bust. Apple seems to be able to get people to shell out for something new just because it is an Apple product. Amazon just doesn’t have that kind of cache. I’d love to be able to drag around 100 books on vacation in the space of a single one, but I’m not going to pay that much for it. Then again I’m not a good example - I waited to get an ipod until I could get it for free with “points.”
The price will come down like all toys… Besides books on kindle are ~ 60% off so if you buy a lot of books it pays off pretty quickly. Free wireless also adds to the payoff equation. For me it paid off in one long day stuck in dallas airport.
I’m not paying for the books I already own.
Plus, most of the stuff is already in print. Secondhand books cost, how much exactly? $2? $3?
I can pay for a crapload of books for the cost of a dumb device, and I don’t need no batteries on vacation. Not to mention that a lot of stuff that I’m interested in is already out of copyright.
That $600 is a stupid sucker bet. That’s a lot of second hand books even with shipping.
Nothing against the device. Sooner or later, everone will offer it free if you purchase the “content”. Oh, the shocker of history. (And no, I’m not old at all. I’m barely over 30.)
I know that they’ve invested a lot in developing a service to compete with iTunes that hasn’t yielded any glimmer of success.
Actually, Amazon’s online music store is pretty successful. While iTunes is still the solid #1 music seller in the US (ALL types of music, not just online), Amazon passed Target to become #4 in the first half of 2008. It appears that their mp3 download service is responsible for the gain.
We’re also near some of Amazon’s big distribution hubs — even in the busiest of times, I choose the SuperSaver option, and I’ve always received items before the estimated delivery date.
I imagine if one lived in the middle of nowhere, the total transit time would be longer.
Weekly jobless claims are firmly in recession territory now.
Ahead of the Bell: Jobless claims seen ebbing
2 hours ago
WASHINGTON (AP) — Government data due out Thursday is expected to show that the number of newly laid off people filing claims for jobless benefits went down last week after spiking to a five-year high.The Labor Department’s tally of new filings submitted for unemployment insurance is forecast to drop to 430,000 for the week ending Aug. 2, according to the consensus estimate of Wall Street economists surveyed by Thomson/IFR. The data will be released at 8:30 a.m. EDT.
New applications for jobless benefits rose a seasonally adjusted 44,000 to 448,000 in the prior week. That left claims at their highest level in five years.
It’s the fifth inning of the housing bust.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aZ1WxOcnldhw&refer=home
Whereas for state and local government it’s “game over.”
http://www.bloomberg.com/apps/news?pid=20601109&sid=aAjM9j4K4v4U&refer=home
Jobless claims rise to highest since March 2002
By JEANNINE AVERSA – 1 hour ago
WASHINGTON (AP) — The number of newly laid off people signing up for jobless benefits last week climbed to its highest point in more than six years as companies cut back given the faltering economy.
The Labor Department reported Thursday that new applications filed for unemployment insurance rose by a seasonally adjusted 7,000 to 455,000 for the week ending Aug. 2. The increase left claims at their highest level since late March 2002.
A program to locate people eligible for jobless benefits played a role in the increase, a Labor Department analyst said. However, the analyst couldn’t say how much of a role.
The latest snapshot of layoff filings was worse than analysts expected. They were forecasting new claims to drop to around 430,000.
The data disappointed Wall Street. Stocks appeared headed for a lower opening with the Dow Jones industrial average futures down 99 at the 11,532 level.
This guy’s honesty is poignant, and will serve him well in his new position. I wish him all the best, as the media is suffering from a severe shortage of poignant honesty.
CHEAPSKATE
By NEAL TEMPLIN
We Managed to Sell Our Home And Keep Our Marriage Intact
August 7, 2008
When we put our Dallas house on the market for $490,000 in February, we thought it would sell in weeks with little discounting.
Talk about being delusional.
We ended up lowering the price of our house five times before it finally sold last month. We didn’t get our first offer until late June, and it was $102,000 below where we had started.
All the uncertainty made us delay buying a new home near New York City, and we’ve been scrambling to find a place before the school year starts. During my 28 years as a journalist, I’ve moved 11 times for my job. This was in some ways the hardest one.
The whole experience made me a tiny part of a huge story — the collapse in housing prices — affecting millions of Americans. It was humbling for me, your typical know-it-all reporter, to find myself caught up in a situation where I had no ready answers.
“All the uncertainty made us delay buying a new home near New York City, and we’ve been scrambling to find a place before the school year starts. During my 28 years as a journalist, I’ve moved 11 times for my job. This was in some ways the hardest one.”
If you’ve moved 11 times in 28 years because you work in an unstable industry (and a receding one, at that), why would you even consider buying? Much less in an overinflated market that’s poised for a huge crash over the next 2-3 years as the financial industry sheds hundreds of thousands of high-paying jobs?
And if the guy has been buying and selling homes over the past 28 years, he should calculate how much he has spent on commissions, closing costs, etc. (not to mention any capital gains taxes) and compare that to how much he has walked away with from those sales. He may come out ahead on the hole if he bought and sold a few times during the bubble, but a majority of those transactions were probably losers. So why did he keep doing it?
“So why did he keep doing it?”
The past 28 years heavily overlapped with the Greenspan era at the Fed (1987-2005), which was generally a period of persistent asset price inflation and particularly a period of above-trend housing price inflation. Whether we will see a continuation of above-trend housing price appreciation is currently in doubt, given unprecedented national rates of real estate price decline underway with no end in sight.
Agreed.
There is complete delusion even among very smart people that the last 28 years were anything but exceptional.
And that complete delusion reaches its pinnacle in the under-40 crowd in the Alt-A Bay Area.
Sadly enough, this is true.
My sister lives there (although she is far from delusional.) I periodically get phone calls ranting about how stupid all the people around her are.
Sigh.
I find it highly telling that Sir Alan Greenspan himself commented just last week to the effect that there is no bottom in sight for housing price declines.
… a majority of those transactions were probably losers. So why did he keep doing it?
Sounds like his dear wife Clarissa was no small factor.
His candor is refreshing, regardless.
RE:
We soon met the buyers, a young couple expecting their first baby. They said they were thrilled to get the house. And they seemed to appreciate the unusual plants Clarissa had picked out and all her touches inside the house. Her strategy had worked after all.
A new baby and unusual plants…we know who the motivators were in this transaction.
I wonder why kind of swill the writer found in the NYC market for his $400k.
Hey Yun: Got seasonal adjustments? Or did you miss that lecture in your time series course?
BULLETIN
U.S. PENDING HOME SALES RISE IN JUNE
ECONOMIC REPORT
Pending home sales index rises 5.3% in June: NAR
By Ruth Mantell, MarketWatch
Last update: 10:11 a.m. EDT Aug. 7, 2008
WASHINGTON (MarketWatch) — In a sign that the U.S. housing market may strengthen in coming months, an index of sales contracts on previously owned U.S. homes rose 5.3% in June from the prior month, the National Association of Realtors reported Thursday.
The index, which is considered to be a leading indicator of existing home sales, reached its highest level since October, but was down 12.3% from June 2007.
Seasonal adjustments? We don’t need no stinking seasonal adjustments.
http://en.wikipedia.org/wiki/Stinking_badges
Ruth Mantell (the article’s author) is an idiot and should be fired immediately.
No, no, no. Use your RealtorLogic (TM). If the month to month numbers had been DOWN, then it would have been seasonal (hurricane/fire/tornado/flood season).
Clearly, savvy buyers are taking this opportunity to snap up great deals before the market takes off again!
Low end fixers on the Bay Area fringe continue their descent, now below six figures:
http://sfbay.craigslist.org/eby/reb/786473307.html
$84800 Charming downtown Vallejo Craftsman Freddiemac owned
This is a new listing of a charming downtown Vallejo Craftsman home.
Home is in pretty good shape w/ a beautifully remodeled bathroom, some kitchen updating. Has a charming floor plan, about 800 sq.ft 1bd 1bth w/ built in cabinets, etc. There is also a detached room.
Comes with termites and a thoroughly bankrupted municipality! LOWcation, LOWcation, LOWcation
“Charming downtown Vallejo”
Oxymoronica
China wants fewer dollars?
I’m not sure how to interpret this, except that the Chinese govt wants to limit the exposure to dollars present in China?
This could be the beginning of the end for the Asian finance of the American current account deficit.
By the way, next step to curbing inflows of foreign cash is the Chinese government seizing foreign assets, through either out right appropriation or imposing significantly higher taxes on foreign capital. A lot of Western investors who invested an unwise portion of their wealth in China are 2-3 years from being very badly burned, IMHO. There is a risk to investing in foreign markets that many amateur US investors did not consider when they moved their retirement savings into China.
People ask about what the next “bubble” could be, and my money is on China. Although there is obviously great long-term growth potential, right now most of the investment is driven by the pursuit of capital gains rather than stable income (by definition, a bubble). Factor in the lack of accounting standards, corrupt bureaucracies, potential for social unrest, and an unpredictable authoritarian government, and it looks like a very bad short- and medium-term risk.
Why would China seize foreign assets? They have been moving toward an open market for quite a while now (a decade or more?). When a country moves in that direction, my interpretation for “why?” is because they want foreign capital/investment/innovation and a market driven economy. If they wanted to go back to a controlled economy then seizing foreign assets would make sense, but I don’t see any reason to believe they are going to move in that direction.
As for the currency, that is still puzzling to me. If they have too many dollars coming in, that implies the yuan is undervalued, yes? Instead of trying to curb the inflow of dollars, why not just let the yuan float?
If the yuan floats, an equilibrium will be found.
If they artificially hold the yuan down but limit the quantity of capital incoming there are likely to be some unintended consequences. Such as what?
- blackmarket for dollars: Why is this bad?
- that could lead to hidden income, which is lower taxes for china?
- More inflation domestically? (in the U.S.) If there are a lot of dollars that would have gone to China, those dollars may be stuck here.
“Why would China seize foreign assets?”
A rational question…….but we are talking about government, remember.
My most likely scenario:
-China perceived that it’s government/corporation/citizens are going to get stiffed, either thru default or hyperinflation.
-Chinese government/corporations/citizens start grabbing every physical US asset they can get ahold of.
-China tells former US owners of the assets to go pound sand, take it up with THEIR court system.
Possesion is 9/10s…..
“how” and “why” are two different things. Two of your points only address “how”, which isn’t particularly interesting imo.
I can’t figure why they would be motivated to do such a thing.
Political philosophy has been a reason in other places/times, but that doesn’t seem to jive with the current political philosophy in China now.
As for your first point, that might make sense. If the U.S. runs the dollar into the ground and the Chinese seize U.S. assets as retribution for the loss of value of their dollar holdings.
China is trying to stop ‘hot money’ from entering in the economy. Hot money are Euros and US dollars that are overpriced to the Renminbi. The hot money is betting the Renminbi appreciates by 40%.
Quite a few US companies with subsidiaries in China move large amounts of dollars to China by “overbilling’ from the Chinese subsidiary. The profit is then moved to China as are the dollars. The dollars are then converted to Renminbi Yuan.
Cool, huh?
Yeah that is cool.
Euros and US dollars that are overpriced
How can the Euros/Dollers be overpriced? If foreigners are sending dollars to China and converting them how can they get a “better than market” exchange (which is what I take “overpriced” to mean)?
The dollars are then converted to Renminbi Yuan.
So maybe those companies then get a preferred exchange rate (compared to if they had to buy the yuan in the open market), possibly at a national bank?
So again, what is the Chinese govt going for here? They are tired of effetively subsidizing these companies with foreign exchange gains?
If so, when do they take the policy to the next logical step and quit propping up the dollar all together? Maybe this is just the first step.
Homebuilders shot up again today at 10:30am - just like they did yesterday at about 11:30. Both of these without a corresponding general market uptick. Anyone know what’s going on? I haven’t heard any news that would cause that.
June pending home sales up unexpectedly
The association’s senior economist, Lawrence Yun, said the swing in monthly signings “indicates a housing market in transition,” but said it nonetheless was encouraging.
“This is welcome news because a rise in contract activity is necessary for an overall housing recovery,” Yun said.
http://biz.yahoo.com/rb/080807/usa_economy_housing.html
Larry Yun of the NAR was spouting off this morning about the 9% increase in sales in June over May.
He neglected to mention that June 08 was off 12% from June 07.
Why does the national media continue to ask the NAR to comment on housing figures?
Why?
Because they make a reporter’s research easy, that’s why. They are easy to get in touch with, they put out lots of press releases, they present themselves as authorities on the subject, and they are always happy to comment.
If you’re a reporter for the local fishwrap, and you can get your crummy 500 word story done in 4 hours for your jerk editor boss versus 8, that’s more time at the gym, the ballgame, the bar, the nail salon, or with the spouse and kids. Sorry if I offend any upstanding journalists out there, but it seems like there has been a race to the bottom in news reporting over the past 10 or 20 years (possibly much longer than that).
Apparently (to answer my own question) it’s because of the pending home sales report. Not sure why such bad numbers would cause an uptick, but whatever. The market seems to be defying all logic these days.
“The market seems to be defying all logic these days.”
Just these days? Lol.
If the market were logical then prices would be logical and guys like Buffett could never become rich.
I don’t know what is going on, except that many of the big national builders have mysteriously remained in a trading range since the onset of the insolvency crisis (roughly one year ago to the day) which completely contradicts a steadily deteriorating fundamental picture. Somebody apparently thinks these stocks have bottomed out and will only rally from here once the credit market tempest gives way to sunny blue skies.
I personally disagree. The globalized credit market has reached a dislocation point of no return which can only lead to fundamental structural adjustment going forward. This spells doom to those hoping for a reversion to pre-2006 levels of housing demand that supported the euphoric ascent of the large national-level homebuilders.
I agree with your disagreement. Over the past year the fundamental factor driving the downturn - decline in home prices - has only worsened, moreso than expectations by all but the bearest of bears. (FWIW in this down turn I consider the “credit crunch” to be a symptom, with the underlying cause being home prices - beginning not so much with falling prices but even before that with the discontinuation of the rise of prices - i.e. that prices actually reached a peak. The credit crunch didn’t start until after prices stopped going up.)
Apparently the only thing that will send these stocks down further (yes I’m short on some) is actual bankruptcy; and of bigger homebuilders than WCI. The recovery timeframe keeps getting pushed further and further out, but the shareholders don’t seem to care. It’s hands over the ears and “LAH LAH LAH LAH LAH”.
“…moreso than expectations by all but the bearest of bears.”
Case in point: Housing price declines are worse than I expected.
Same here - at least in terms of how fast prices have come down. I thought they’d be more sticky.
To me that’s a bad harbinger - I think they’ll end up coming down further than most of us expected too - like in the end may end up below pre-bubble prices in many areas even without adjusting for inflation. I think the fact that they’ll end up below inflation-adjusted prices (i.e. overshoot) is a foregone conclusion at this point; they may even end up worse.
NYS Realtards released June sales data and its beyond ugly when compared to same month 06 or 07. Double digit declines in nearly every county…. -30, -40 and -50% in transaction volume. Of course the front page spin is June08 sales are up over May08…. imagine that.
Boo hoo for you realtards. lmao.
Support your local realtard. They are the ones that are using their own money to finance ads to pursuade knifecatchers to commit new money to the system and offer hope to the FBs to hang on just a little longer.
This is to the benifit of the taxpayers.
Onondaga still in the black, YOY sales and price.
OK I officially give up.
Carrie,
Onandaga sales are down over 16% Jun08 over Jun06.
I want my “I told you so” moment w/o any arguments. (pout)
But thanks for the cheer up attempt.
Mortgages Made in 2007 Go Bad at Rapid Clip
Delinquencies Worse Than 2006 Vintage;
New Stress on Banks
By RUTH SIMON
August 7, 2008; Page A3
Mortgages issued in the first part of 2007 are going bad at a pace that far outstrips the 2006 vintage, suggesting that the blow to the financial system from U.S. housing woes will be deeper than many people earlier estimated.
An analysis prepared for The Wall Street Journal by the Federal Deposit Insurance Corp. shows that 0.91% of prime mortgages from 2007 were seriously delinquent after 12 months, meaning they were in foreclosure or at least 90 days past due. The equivalent figure for 2006 prime mortgages was just 0.33% after 12 months. The data reflect delinquencies as of April 30.
Evidence that lax lending standards were leading to higher mortgage delinquencies first emerged in late 2006. The first major casualty of the subprime credit crisis, New Century Financial Corp., imploded in early 2007. Yet the data from the FDIC and others suggest that lenders didn’t substantially tighten standards until at least July or August 2007, when credit jitters hit Wall Street and financial stocks began to swoon.
The FDIC’s analysis was based on mortgage data provided by LoanPerformance, a unit of FirstAmerican CoreLogic Inc. LoanPerformance says it tracks more than 95% of mortgages that were bundled into securities by financial institutions, not including those securitized by government-sponsored mortgage giants Fannie Mae and Freddie Mac.
Data on other classes of mortgages suggest the same trend. Freddie Mac reported Wednesday that 1.38% of the 2007-vintage loans it purchased were seriously delinquent after 18 months compared with 0.38% of 2006 loans at the same point in their life. Freddie Mac generally purchases loans made to creditworthy borrowers.
RE: the blow to the financial system from U.S. housing woes will be deeper than many people* earlier estimated.
*Save for the astute tin-foil hatters at the HousingBubbleBlog.
Greenspan Blasts Housing Bubble He Helped Create
http://seekingalpha.com/article/89691-greenspan-blasts-housing-bubble-he-helped-create?source=yahoo
“Dickey Boy” …Gone Fishin’ … up next:… duck huntin’ in Dubai
Rumor has it…he’s looking for just the right 20# trout to slap across those smug Iranian faces.
If Shrub’s in China & Cheney’s in Montana…who running the “Shadow Gov’t Offices?
BILLINGS - Vice President Dick Cheney was in Billings Monday on his way to a fishing trip.
Officials in the Vice President’s Press Office said he was on his way to the Big Horn River near Hardin. The Vice President makes periodic stops to the Big Horn River and usually hires a local guide.
A fish biologist with Montana Fish Wildlife and Parks said the Big Horn River is a world-class fishery with about 5,000-to-6,000 catchable trout per mile. Details of Cheney’s trip were withheld for security purposes and he did not have time to speak to the local media on this trip.
http://www.kulr8.com/news/local/26265544.html
Shiller’s got a new book coming out:
http://www.amazon.com/Subprime-Solution-Todays-Financial-Happened/dp/0691139296/ref=sr_1_6?ie=UTF8&s=books&qid=1218094450&sr=1-6
Deflation has already hit the purchase price:
List Price:
$16.95Price: $11.53
This is just pure anchoring bias not true deflation.
After Apple introduced the iPod for $600, it seems cheap at $300. However, it’s just as stupid at $300 as it was at $600.
Even the Rich Get Home-Equity Yanked
By MARSHALL ECKBLAD
August 7, 2008
Wall Street firm Morgan Stanley added some of its well-heeled clients to the long list of customers whose lenders have frozen or reduced their home-equity loans.
While federal laws do not allow lenders to force responsible borrowers to repay the loans immediately, those same federal statutes allow lenders to reduce or eliminate customers’ home-equity lines of credit if the lender can reasonably determine that a borrower’s home has fallen in value.
“A segment of clients was recently notified of a change in the status of their home-equity line of credit due to a change in the value of their property and/or their credit profile,” a spokeswoman for Morgan Stanley said.
The rich aren’t so different any more.
The reason for pulling the loans is reduction of bank capital needed. Banks need so much money that even a few thousand helps.
If a HELOC is for $100K and the borrower has used 10K, the bank needs to keep $8k in reserves. If the HELOC is reduced to $10K, the bank needs $800 in reserves.
they could offer their savers higher rates, but apparently that is still out of the question … they don’t seem desperate enough yet. I try to negotiate every month about rates (in Netherlands) but the banks are not really interested, not even for relatively big accounts. Still impossible over here to beat even the official inflation figures with a savings account
Some banks in the US are offering astronomical rates
for example
Chase is baseline standard in the US offering 3.25% for 12months CD.
the rat houses
Wachovia is offering 4.25% for a 12 month cd and 5% for a 3 yr CD
Bank of America is offering 4% for a 12month CD.
WAMU is offering 4%
etc. etc. etc.
… and the tightening continues …
If anyone losing their HELOC were truly “rich,” then this news would represent only a trivial annoyance.
If losing their HELOC poses a serious financial problem for a household, then they were not rich, nearly wannabes.
I am struggling very hard to avoid saying, “I told you so” at this point.
latest news
December gold down $5.50 to $877.50 an ounce on Nymex
David Callaway
DAVID CALLAWAY
Supply and demand turned upside down
Commentary: Commodities plunge shows it was hot money all along
By David Callaway, MarketWatch
Last update: 12:01 a.m. EDT Aug. 7, 2008
SAN FRANCISCO (MarketWatch) — The commodities bubble is dead. Long live the commodities bubble.
In fact, the plunge in prices of oil, gold, corn and other commodities over the past month could easily just be an overdue correction in prices after the impossible gains of the past 12 months. And long term, we can expect that most finite resources — like oil — to gain in prices as we use them up.
But long term, my SUV will be dead, so let’s focus on what’s happened this summer. After several years among the world’s best performing investments, commodities have hit one of their biggest slumps in a generation in the past few weeks.
Oil, which doubled in value over the past 12 months, is down about $30 a barrel from its $147 high, or a bit more than 20%. Gold, which traded above $1,000 an ounce in March, is now below $900. Agricultural commodities, whose price surges this past spring sent starvation warnings across the globe, have now fallen for several weeks running.
“I’m struggling very hard to avoid saying ‘I told you so’ at this point.”
You don’t have to say it; your article says it for you.
As opposed to you fine gentlemen, I will be buying most commodities on this break. I will continue to short US financials and European financial institutions, I will be buying Asian banking and Middle Eastern banking institutions.
Nothing goes straight up or straight down, but there is no break in the commodities yet. It is just a typical summer slowdown to get out the weak holders. A larger slowdown than last year, but it comes after a larger increase.
The author is pretty ignorant about commodities markets, listed and unlisted.
I am not discussing my investment strategies, other than to say that I am diversifying to a large degree in order to avoid overweighting towards any of myriad financial pitfalls associated with secular bear markets.
Let’s wait until the patient is dead before giving any post-mortems, eh? We’re still in the 3rd or 4th inning, and have yet to see how it all hashes out.
Not that I’m an oil or gold bear. Personally my thoughts are:
- Oil was unjustifiably high in price, and perhaps still is so. It was high on low reserves, and the extrapolation of current trends in demand vs. supply. However that didn’t take into account demand decrease due to economic downturn. In the long run it may go back up due to more speculation, if the stock market dives more, but that’ll just be another unjustifiable rise IMO.
- Gold has been and is still justifiably high. If this downturn turns *really* ugly (as in, worse that GD 1) then gold will be - well, it’ll be worth more than it’s weight in gold. If instead this downturn smooths out (including a trend towards reduction of the U.S. federal deficit), then gold prices will go back down to “normal” levels - about $300-400.
- Food commodities were justifiably high, driven by bad weather conditions and by decreased supply due to stupid things like corn ethanol. I’m not sure how all the factors have been recently though - my impression is that the weather conditions have improved, and ethanol has now appropriately gotten a bad rap, so long-term future looks better for food.
Ethanol has now appropriately gotten a bad rap, but is Congress talking about dropping the quotas that they mandated in the past?
Euro parliarment has already talked about their ethanol subsidies and decided (of course) to do nothing. Corn farmers will get rich quick for the next few years at least. Many big ethanol plants are under construction in my country, I don’t think they will stay empty for long.
I think this is a worldwide problem that will not go away soon because of all the political meddling.
Ethanol from corn is a problem, but it is not as serious as bio=diesel from soy beans. 75% of the increase of food prices last year was attributed to bio-diesel per the IMF.
I like the way Callaway stated it:
“The commodities bubble is dead. Long live the commodities bubble.”
toe-juh so. But as with shacks, everyone knows gold always goes up.
The Financial Times told you so…
View of the day: Gold’s lustre is fading
By John Reade
Published: August 7 2008 15:19 | Last updated: August 7 2008 15:19
UBS has cut its short-term forecast for gold by 15 per cent to $850 an ounce following the recent slide in the oil price.
“Just when it looked like fears of systemic financial weakness would drive gold up through $1,000 an ounce, the fall in crude has seen a number of consequences that have undermined the short-term argument for gold as a safe haven,” says John Reade, head of commodity strategy.
He points out that investors have become less risk-averse, equities have moved higher and the dollar has regained some strength.
“Gold has succumbed to long liquidation with investors cutting positions on the Comex futures market and some exchange-traded fund redemptions have been noted over the past week or two. Gold is now holding below the 200-day moving average, currently $892 an ounce according to Bloomberg, and this should trigger further speculative selling,” he says.
“‘Gold is now holding below the 200-day moving average, currently $892 an ounce according to Bloomberg, and this should trigger furthur speculative selling’, he says.”
Does anyone on this blog except myself think this is nuts? The price of gold goes down so people sell the stuff? If gold was all that wonderful to own wouldn’t lower prices be a reason to buy it?
This just tells me that nobody knows what the price of gold should be, that there is no way to measure its value except by its price.
Lol.
Financial Times has a special report on the anniversary of the credit crunch.
http://www.ft.com/bigfreeze
i’m not the sharpest knife in the drawer, but can someone tell me why tech is in ralley mode today? if people are losing their jobs, and no one can buy back to school clothes (or any other things for that matter) because of food and fuel prices, why do these boneheads think everyone will go out and spend money on electronics?
Theory 1: Those of us who have paid attention since 1987 have seen the stock market rally strongly in the wake of every slowdown since Alan Greenspan took over the Fed chairmanship. Given that BB publicly announced his intentions to continue the fine policy regime AG established, why would one assume it will be any different this time?
Theory 2: On a fundamental level, the stock market is a leading indicator of where the economy is headed. The big drops that we saw beginning last fall through recently reflect forward-looking market participants’ anticipation of weaker corporate results going forward. We currently see rising levels of unemployment fulfilling the stock market’s (correct) forecast of economic slowdown; when firms know demand will be weak, they cut back on workers in order to keep costs in line with production. But the better aligned costs become with production (and revenues), the more profitable firms will look going forward. The stock market is beginning to sniff recovery, the first signs of which will news of writedowns and negative earnings reports supplanted by a return to corporate profitability.
Theory 3: The PPT is supplying liquidity to the U.S. stock market (through various special below-market-interest-rate lending facilities to investment banks) in order to fend off an all-out collapse of the global financial system.
thank you prof. bear, i really like your #3 theory. it makes me smile to think that the PPT might lose some of the money they use to control the markets! LOL
Don’t forget they have a technology called a printing press…
in Europe everything has been in fierce rally mode for about a week, except today. External conditions are similar to the US (surging inflation, surging wages in some sectors, credit crunch fallout, consumer confidence fell of a cliff, housing and jobs market are starting to weaken …).
Looks like a genuine bear market rally to me …
An odd little observation here.
Are the low rates increasing the number of walkaways? Its in the dollar per month kind of thinking.
If you have people trapped in a mortgage/house and rates are very low; they can decide to walk away easier because they think a cheaper per month payment is available.
If rates were higher then the people would decide to stay because why trash your credit for the same high payment.
Its balanced by the number of people in destructive ARM loans that will be in trouble if rates adjust upward. However, a substantial number would be pushed into renegotiation rather than default if their other options are more limited.
So, not sure if we are making the situation much worse or not.
Low rates?
They’re the highest they’ve been since this bubble began. Not sure what makes you think they’re low.
Gloom is the new black, in the fall of the house of Greenspan.
Gloom descends on US finance executives
By Joanna Chung and Justin Baer in New York
Published: August 7 2008 19:31 | Last updated: August 7 2008 20:10
US finance chiefs’ outlook for America’s economy sunk to a four-year low amid mounting concern over high oil prices, waning consumer demand and inflation, according to a study.
The findings, which are to be released on Friday, follow a spate of US economic data and corporate earnings reports in recent weeks that fuelled fears of a recession and damped hopes of an easing of the financial crisis.
Optimism among chief financial officers has also faded this year, and in the second quarter touched its lowest point since June 2004, a survey by Financial Executives International and Baruch College’s Zicklin School of Business showed.
At least half of those surveyed believed that the price of crude oil would climb to at least $160 a barrel in six months, or about a third higher than where it traded on Thursday.
How many more $3+ bn mega-investment bank adjustments await before the insolvency crisis ends?
Citi in $20bn settlement as crunch reverberates
By Francesco Guerrera, Joanna Chung and Aline van Duyn in New York
Published: August 7 2008 19:26 | Last updated: August 7 2008 19:26
The fall-out from the credit crunch hit the financial sector hard again on Thursday as Citigroup agreed to a $20bn settlement with regulators over its marketing of auction-rate securities and AIG shares plunged amid fears the insurer might need more capital.
The protracted woes of two of the world’s largest financial groups underline the extent of the problems plaguing Wall Street and suggest that, even after a year of huge losses and writedowns, banks and insurers remain under severe pressure.
…
In a move that could force other large ARS brokers such as UBS and Merrill Lynch to do the same, Citi has pledged fully to compensate small investors who sold securities at a loss after February 12, the date when the market collapsed.
What Citi did was admit to fraud, lying and theft. It would be a foolish investment house or bank that did not follow suit. The civil penalties can be far greater than the government penalties.
Based on the fact that the banks all represented the ARS similarly, one could even argue RICO status and that can be treble damages. Oops
Just where in the hell do you two think all this make whole ARS investment settlement money is gonna go?
Gonna be an interesting rally in something. I wonder what it might be?
dont bury survivors.
“I wonder what it might be?”
Investment banking shares, due to the kitsch-and-sink effect?
I think Hoz differs to the Asians and the Turbans banks…
Now how does that energy story end again?
Banks struggle with pay-option arms, Faber Report video:
http://www.cnbc.com/id/15840232?video=816253819&play=1
You guys are always so far ahead of the MSM, it feels like I have an unfair advantage in having an HBB bookmark sometimes.
Fed’s War on Savers inadvertently thwarted by misdirected stimulus checks…
August 7, 2008, 3:52 pm
Economists: Most Stimulus Went Into Savings
Matthew D. Shapiro and Joel Slemrod of the University of Michigan wrote the pre-eminent paper on the government’s 2001 stimulus payment. They have examined the preliminary data from the Bureau of Economic Analysis, and come to the conclusion that most of the 2008 stimulus payments went into savings. In the following analysis provided to Real Time Economics, Messrs. Shapiro and Slemrod suggest a second round of stimulus being considered by the government would be better spent on infrastructure investments of payments to states:
Data for May and June suggest that the rebate payments provided by the Economic Stimulus Act of 2008 may not yet have provided much of a boost to consumption. The increase in personal saving in May and June approximately matched the size of the rebate checks in those months.
savings_cs_20080807154911.jpg
Source: Shapiro and Slemrod, University of Michigan
Here are the official numbers from the Bureau of Economic Analysis. Personal saving was $45.6 billion in May, compared to $48.1 billion in stimulus payments in May. Personal saving in June was $23.0 billion, compared to $27.9 stimulus payments in June. In stark contrast, personal saving averaged only $2.9 billion per month(!) during the first four months of the year.
I think B-52 Ben needs to step up his efforts to convince Americans (and the rest of the world) that saving is the most stupid thing one can do … time to drop rates to zero and make sure that inflation gets completely out of hand!
that is what i did with mine. but i can tell you that my neighbors had several all night (very loud) beer partys until the funds went dry. so just for that reason i hope they do not have a second round of payments comming anytime too soon! i like to sleep at night!
“…but i can tell you that my neighbors had several all night (very loud) beer partys until the funds went dry.”
My personal favorite story was the one about an increase in pornography sales coincidental with the issuance of stimulus checks (wink wink!)…
a bit off topic, but anyway:
For the third time in a week the railway in my area of the Netherlands came to a full stop for many hours as a result of theft of the copper wires that are used for the electricity. It is starting to sound more and more like Argentina, and homeprices are not even declining yet. Of course it doesn’t help that if such thieves are caught they usually get away with a warning from the policy, so they can steal some more wire the next day (or night). Someday the internet will probably cease to function as a result of cable theft …
Today our Ministry of Truth admitted that inflation is rising (officially 3.2% now, while EU inflation is 4.1% - the difference is mostly the result of fixed rental prices in the Netherlands, which play a huge part in the cpi calculation and of course declining computer prices). But they claim that wages are rising stronger than inflation (3.5%) so workers should still be in excellent shape.
Even the TV news now admits that prices of all kinds of consumer items are getting out of hand. Of many items that were checked none was rising as slowly as the official CPI, I guess the average was far above 10%. Many small business owners tell me that their customers have run out of money as a result, and sales are falling of a cliff. I just wonder how long they can keep homeprices rising in this climate …
Apparently the thieves are behind the times, and haven’t realized the commodities bubble has popped.
did they turn off the faucet? or are they having trouble getting people to drink?
American Express Company (AXP)
Income Statement
http://finance.yahoo.com/q/is?s=AXP
Sucky employment day in CNY:
Honeywell to move manufacturing to China; 290 to lose their jobs in Skaneateles
http://www.syracuse.com/news/index.ssf/2008/08/honeywell_to_move_manufacturin.html
Magna said it would consider closing the plant if it could not cut costs. More than 2,000 jobs are at stake.
http://www.syracuse.com/news/index.ssf/2008/08/npg_owners_we_may_have_to_shut.html
If anyone has the time it might be interesting to read the comments after the Magna job article. The downturn has only just begun and the locals are going for each others’ jugular over perceived income and other unshared advantages. (shakes head) Guess all the class divisions and their resulting jealousies are coming to the surface.
This is what you get when you allow American Corporations to go over seas for production instead of somehow working out a fair agreement on the employment agreement that doesn’t screw either side
June Consumer Credit
http://online.wsj.com/mdc/public/page/2_3024-credit.html
quite a big jump up from May.
Like nobody saw this coming:
http://money.cnn.com/2008/08/07/news/companies/same_store_sales/index.htm?postversion=2008080712
And then:
http://money.cnn.com/2008/08/07/news/economy/consumer_credit.ap/index.htm?postversion=2008080715
What were they hoping would happen after the stimulus dollars ran out? Now we have a few more iPods and HDTVs laying around and we owe even more money back. Brilliant!
Huh. Links no worky. If you copy and paste those links into your browser they work.
Not sure what I did wrong…
Yes, I am…did my hrefs backwards. My bad.
The New Math of Lending
With banks tightening their credit standards, many have to walk a fine line when it comes to lending to consumers.
“Saddled by soaring loan losses, banks have been drastically tightening their lending standards, effectively putting credit out of reach for many consumers in search of mortgages, credit cards or car loans.”
.
.
.
“Some banks, for example, are boosting rates sharply on risky loans in order to avoid attracting any new business.
“They just don’t want them,” said Adam Schneider, a principal at Deloitte Consulting who deals with clients in the financial services industry. “They are pricing their way out of the problem.”"
[Insert Combotechie-esque "sounds like there's a real shortage of cash out there" line here]
Sounds like there’s a real cash shortage out there.
…chuckle. Johnny-on-the-spot!
I think combo-techie dollar is correct.
If the hoz/Bronte theory is correct, and the Baltics go uder, draggin down the Nordics, blowing the Euro sky high, France balks….French and Italians take to the streets, Euro cracks hard.
And I imply the Euro currency is the real bubble. When she blows, its decoupling, and America fends for herself.
Im long dollar. Europe cant fight a currency war…Only Japan, Germany, UK, Russia, and China…can fight that way.
Part of me thinks tha Hoz long Brazillian Real is a true American Function of old school European thinking that Swiss Frank long is good.
same same but different.
Authorized-user accounts back in credit-scoring formula
http://www.marketwatch.com/news/story/realty-qa-authorized-user-accounts-back/story.aspx?guid=%7B0444642E-8403-4474-997B-88C3AE34DA01%7D&dist=hpts
WASHINGTON (MarketWatch) — The company that creates the algorithms which are used to generate credit scores has found a way to restore authorized-user credit accounts to the calculations while still mitigating the abusive practice known as “piggy-backing.”
Piggy-backing is a shady credit-repair tactic in which would-be borrowers who otherwise don’t measure up to a lender’s credit requirements are able to present the lender with a false reading by purchasing or borrowing another borrowers’ credit-card account.
Fair Isaac & Co., the firm for which the popular FICO credit scores are named, cracked down last year on the practice by eliminating authorized-user accounts altogether in the scoring calculation. But the company now says it has found a way to include those accounts when they are legitimate and still exclude the piggy-backers.
Credit crunch in a century’s context
Published: August 7 2008 20:03 | Last updated: August 7 2008 20:03
A few weeks after Black Monday, the stock market crash of 1987, one Wall Street banker gave a common view of the crisis to Barron’s magazine. “We’re observing the end of an era in two very specific areas,” he said. “First is the uncontrolled deregulation of global financial markets . . . The second point is, the mindless commitment of human and financial resources to securitisation has reached its peak and now will contract for the indefinite future.” That he turned out to be entirely wrong illustrates how hard it is to judge the weight of a crisis still under way. The credit crunch is now a year old, but unless a deep real recession follows, it looks like cause for reform rather than revolution in the financial system.
The bogeymen of 1987 were computerised trading – now universal – and equity index futures – now among the largest markets in the world. Many called for the reregulation of the financial sector as a result, but by 1999 Glass-Steagall, the measure that separated US banks and securities traders, had been repealed. It takes more than a crash to change the world.
My wife just walked next door to hand the young family that lives there the bottom 1/4 of a gallon of milk. It seems they are out of cash to buy consumer staples.
Thank you, Federal Reserve, for placing the rescue of Wall Street’s worst gamblers from their bad gambling debt at a higher priority level than the survival of middle class American families.
Thank you for ignoring inflation in food and energy prices while they sail through the stratosphere to levels that squeeze young families to the breaking point.
Heckuva job, Bernanke!
PB…You know it really keep bothering me also about who is being helped out by the helping hand of the Feds.
Another thing that bothers me is this rational that America has to compete with cheap labor world wide and that is why we are loosing jobs and the manufacturing based we use to have in America .
I remember in USA history when the one railroad company became a monopoly because it eliminated its competition by offering cheap rates for a while to cut out it’s competition .Than of course that kingpin railroad raised the prices after they were the only game in town .
Than the thought occurred to me that the cheap products from China and other slave labor countries is in effect a monopoly . A monopoly is defined as control over a particular product .
By allowing China to produce our products ,we are creating a monopoly
that will keep reducing our manufacturing and jobs until there isn’t any manufacturing left here at home .
This argument that world labor competition creates more efficiency is
a false one because it only takes into consideration the bottom line cost to produce a product . Why would the reduction of the standard of living of the workers of the USA be beneficial for people living in America .Is the highest goal that a product be produced cheaply so as to become a monopoly .
So ,a country produces a product cheaply so all competing Countries go down to the standard of living of the lowest producing country to remain competitive .And the bottom line is that all human labor is reduced to
low wages ,and the Corporations get the windfall of this wage monopoly.
Now if the low wage countries brought their wages up to the level of the USA ,than they couldn’t create this monopoly that has shattered the USA
economy in reality .